Thursday, September 29, 2011

What an EXCELLEBT Game Plan to Dilute the 2 G Spectrum Scam Case!Pranab pacifies sulking Chidambaram and 2G note row over!The government on Thursday sought to bury a flaming row over a finance ministry note that linked Home Minister P Chidambaram to

Indian Holocaust My Father`s Life and Time - SEVEN HUNDRED THIRTY TWO

Palash Biswas

http://indianholocaustmyfatherslifeandtime.blogspot.com/

http://basantipurtimes.blogspot.com

29/09/2011

All 269 convicted in Vachathi rape and assault case

Dharmapuri (Tamil Nadu) : All 269 police, forest and revenue department personnel accused in the 1992 assault and rape of tribals in Vachathi in Tamil Nadu's Krishnagiri district were convicted Thursday by the district court. The sentences will be pronounced later.

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All 269 convicted in Vachathi rape and assault case

Seventeen of the accused were held guilty of rape of 18 women. Dharmapuri Principal District Judge S. Kumaraguru pronounced all the accused guilty of the various charges charges they were slapped with for the infamous incident that had sent shockwaves across Tamil Nadu.

The prosecution case was that 155 forest personnel, 108 policemen and six revenue officials raided Vachathi village on June 20, 1992, in search of sandalwood allegedly hidden by villagers.

During the search, the villagers, including women, were dragged out of their places and over 100 of them were brutally assaulted. At least 18 of the women were raped.

Of the 269 accused, 54 have died during the proceedings. Krishnagiri in Dharmapuri district is about 250 km from Chennai.

Source: IANS

MP BJP protests by sending drafts of Rs 32 to PM, Sonia

Joseph John Sep 27, 2011, 10.58pm IST

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BHOPAL: In a novel way of protest, the ruling BJP in Madhya Pradesh today sent demand draft of Rs 32 each to Prime Minister Dr Manmohan Singh and Congress chief Sonia Gandhi, mocking at the Planning Commission affidavit in the Supreme Court that those spending this amount in urban areas would no longer be deemed poor by the government.
State BJP president and Rajya Sabha member Prabhat Jha also got two other demand drafts for Rs 26.70 each drawn in favour of finance minister Pranab Mukherjee and planning commission vice chairman Montek Singh Ahluwalia and sent them as a protest, questioning the current methodology adopted by the commission to arrive at such cut offs and alleging that such 'findings' amounted to ridiculing the poor and poverty.
http://articles.timesofindia.indiatimes.com/2011-09-27/indore/30207823_1_prabhat-jha-drafts-mp-bjp

29 SEP, 2011, 05.37AM IST, SUDHIR KAPADIA,ET BUREAU

An amnesty scheme for wealth hidden abroad

Of late, the tale of the elusive 'Swiss' accounts has resurfaced with the proposed treaty between the UK and Swiss governments, where Switzerland has agreed to repatriate to the UK an anonymous taxamount calculated on the aggregate income of UK tax residents, in their Swiss bank accounts.

The tradeoff: the names of the individual UK taxpayers shall not be revealed by the Swiss government in return for this lump sum munificence. The UK government sees an opportunity to shore up its treasury by the one-time payment, and for the Swiss government, it may come as a pressure to avoid yet another instance of further diluting its much-vaunted banking secrecy.

From an EU and tax policy perspective, this may not be the most optimal result as it goes against the grain of ensuring transparency and 'naming and shaming' of tax evaders. This approach adopted by the UK government is in sharp contrast to the one favoured by the US government, where the US government extracted the names of US tax residents illegally holding bank accounts in UBS. It simultaneously announced a tax amnesty for US tax residents under which payment of evaded taxes and reduced penalty would ensure closure of all other proceedings against US tax residents.

Of course, the US Internal Revenue Service warned the tax citizenry at large about dire consequences, including prosecution, if US tax residents do not come forth to declare their secret deposits in offshore accounts.

In India, a raging debate is on over the methodology by which the country should endeavour to recover the 'lost billions' in tax revenues due to alleged siphoning of Indian money to offshore locations. Policymakers here can perhaps ponder over the approach that should be taken, vis-A -vis the Swiss government in the light of the above international developments, vis-A -vis the US and the UK.

At one level, it can be argued that there is no need for any incentive mechanism to coax reluctant Indian taxpayers to declare their undisclosed income as recent initiatives such as sharing of information including on bank accounts maintained with Swiss banks should enable Indian government, in specific instances, to ask for the relevant information from the Swiss authorities and take further action based on that information.

In other words, it can be argued that time has come for the Indian government to start using tools such as exchange of information, agreements that have been entered into with various offshore countries and sharpen the revenue knife to cut into the undisclosed wealth outside India and get its fair share of revenues.

This, of course, is easier said than done as it will be a long and arduous process that Indian authorities will have to go through, before they get to the much-coveted and highly-fancied offshore bank deposits and other wealth.

It is also a moot point how legally successful Indian tax authorities will emerge in tracing the alleged undisclosed wealth outside India to Indian beneficiaries. Viewed from this angle, the pact like the one UK has entered into with Switzerland would look attractive. It immediately garners an entire one-time revenue payment that can fund the societal obligations for the Indian government and, hopefully, make a clean slate going forward to deter tax evaders from similar action in future.

http://economictimes.indiatimes.com/news/economy/policy/an-amnesty-scheme-for-wealth-hidden-abroad/articleshow/10165141.cms

What an EXCELLEBT Game Plan to Dilute the 2 G Spectrum Scam Case!Pranab pacifies sulking Chidambaram and 2G note row over!The government on Thursday sought to bury a flaming row over a finance ministry note that linked Home Minister P Chidambaram to the 2G scandal, with Finance Minister Pranab Mukherjee denying that the note reflected his views on the controversial 2008 spectrum allocation.What broke the logjam amid hectic consultations led by Congress president Sonia Gandhi on the politically volatile 2G spectrum note was her appeal to finance minister Pranab Mukherjee.

It is Foolish to Overlook the Coordination between two Chieftains of ARYAN BRAHAMINICAL Venegeance against 95 percent of Indian Population, the BAHUJAN MULNIVASI Excluded Non Brahamin Non Aryan Communities!On the Other hand, the Main Opposition Player of the TWO Party Brahaminical System the Bharatiya Janata Party (BJP) on Thursday dismissed as "untenable" finance minister Pranab Mukherjee's explanation that the controversial note from his ministry on the 2G scam did not reflect his views.Mind you to Remeber the Voting on NO Confidence Motion against UPA Government on Indo US Nuclear Deal and Just remeber the Parliamntary Nautankee to DUPE the Masses. The Game goes on!However,BJP leader Ravi Shankar Prasad said the finance minister did not answer the main question about loot of public money.

He accused home minister P Chidambaram and Mukherjee of being busy in their "ego battle".
"It is not your internal matter or ego battle to be settled, you are accused, your role needs to be investigated," Prasad said.

"The country will not believe this completely untenable clarification of Pranab Mukherjee, which is more the result of ego battle of the ministers than a quest for public probity," he said.
Prasad said that the statement only "deepened the crisis" by revealing nothing and the government stood "exposed before the public of the country".

It is an Elegant Exposure of LPG Mafia Rule and Overwhelming Corporate Lobbying Opening all Gates of Free Market Corruption! Brahamin PRANAB Proved himself as the Best Face Saving CRISIS Manager of the Hegemony once again!

In a bid to show that the Congress-led United Progressive Alliance was united, Mukherjee read out a prepared statement outside his North Block office. He was flanked by a visibly sullen Chidambaram and cabinet ministers Salman Khurshid and Kapil Sibal.

Amid a raging controversy over theFinance Ministry note on 2G spectrum allocation, Congress President Sonia Gandhi today met Lok Sabha Speaker Meira Kumar.

Gandhi's 40-minute meeting with Kumar at the Speaker's residence took place ahead of the UPA chairperson's confabulations with senior ministers, including Finance Minister Pranab Mukherjee.

However, there was no official word as to what transpired at the meeting with the Speaker which was described by sources as a courtesy call.

After meeting Kumar, Gandhi held consultations with Defence Minister A K Antony and her political secretary at her 10, Janpath residence.

Later, Mukherjee also had a meeting with Gandhi. This is Mukherjee's second meeting with Gandhi in the last three days.

Earlier,CBI on Thursday placed before theSupreme Court the Finance Ministry file on the issue of fixing the price of 2G spectrum in 2008 but it could not be taken on record and returned to the agency as some pages of the file were missing.

"Check the pages. Where are the running pages"? a bench of justices G S Singhvi and A K Ganguly said when it found that some pages were missing from the file.

After drawing the attention of the CBI counsel and senior advocate K K Venugopal, the bench returned the file asking the agency to take corrective measures.

However, during the brief perusal of the file, the bench said it was inherent in the note of the then Finance Seceretary D Subba Rao that a suggestion was taken from the Army on the issue of spectrum.

The court also took note that there was a document to suggest that telecom regulator TRAI has written to the Department of Telecommunication about creating a level-playing field for the new entrant in the sector so that the new comers do not face pay more.

"Apart from the factual background (on spectrum allocation), the paper (note) contains certain inferences and interpretations which do not reflect my views," Mukherjee said.

The note sent to the Prime Minister's Office by the finance ministry in March suggested that the spectrum allocation could have been auctioned had Chidambaram, as the then finance minister, insisted.

Since the note became public, Chidambaram has come under attack for alleged links with the spectrum scandal, which has landed a former cabinet minister and several others in prison.

Chidambaram also faced opposition calls that he should quit.

After Mukherjee spoke, the home minister said the controversy triggered by the note was now over.
He added he was happy with the statement read out by his "senior and distinguished colleague".

Mukherjee's statement came on a day after he again met Prime Minister Manmohan Singh and Congress president Sonia Gandhi, who were desperate to end a crisis that seemed to pit Mukherjee against Chidambaram.
In his statement, Mukherjee said the government had sought to prepare "a harmonised note based on facts ... for use by various representatives of the government. A group of officers prepared an inter-ministerial background paper which was sent to PMO on March 25," he said.

He said the inferences in the note -- which is what caused the problems for Chidambaram and the government -- did not have his approval.

Mukherjee had until now taken no such categorical stand. He had met Manmohan Singh once in New York and Sonia Gandhi twice but did not divulge the details of their discussions.

The prime minister had already declared that he stood by Chidambaram.

Mukherjee also linked 2G spectrum allocation in 2008 to the earlier National Democratic Alliance (NDA) government led by the Bharatiya Janata Party (BJP).

"The policy of the government in 2007-08 was continuation of the policy adopted in October 2003 and as reiterated by the TRAI (Telecom Regulatory Authority of India)," he said.

In the backdrop of controversy over a Finance Ministry note on the 2G issue, Finance Minister Pranab Mukherjee today met Congress chiefSonia Gandhi.

Mukherjee's consultations with Gandhi came a day after his letter to Prime Minister Manmohan Singh setting out in detail the events surrounding the controversial allocation of spectrum.

Before Mukherjee's meeting, Defence Minister A K Antony held parleys with Gandhi and also her Political Secretary Ahmed Patel, party sources said.

This is the second meeting Mukherjee has had with Gandhi in the last three days. Home Minister P Chidambaram had met Gandhi earlier this week and the Prime Minister yesterday.

Mukherjee's letter has come in the midst of a controversy triggered by the surfacing of a note from a Finance Ministry official suggesting that the 2G scam could have been avoided had Chidambaram, then Finance Minister, insisted on auction instead of giving licences at 2001 prices.

The letter is understood to have detailed the various meetings held on the subject of allocation of 2G spectrum, the correspondence among various ministries and the events leading to the decision.

More than a million people will enroll for unique Aadhaar identity number per day by October which has so far been provided to 37 million people across the country, chairman of Unique Identification Authority of India Nandan Nilekani said.

"The goal is to give 1.2 billion people unique number and that is well on its way. We have already given unique numbers to 37 million people, another 50 million people enrolled and are waiting to get numbers," Nilekani said at a function here.

He said while "new people are getting enrolled across the country at the rate of 6,00,000 a day in about 20,000 locations, by October the figure will be one million people per day".

Aadhaar is a 12 digit individual identification number, which will serve as a proof of identity and address anywhere in India.

Nilekani said there is little possibility of duplicates arising out of the system because only one ID is issued to a person taking his biometric signature.

"One ID means that if you are coming with a false name, that is going to remain for the rest of your life... something which no one would like," he said.

Nilekani said every person who gets an ID from theAadhaar system also gets an online ID. The online ID can be used to verify the identity of a person anywhere.
Food inflation at 9.13%; Finance Minister calls situation grave
: Rising prices of essential kitchen items like potato and pulses pushed food inflation closer to the double-digit mark at 9.13 per cent for the week ended September 17, a development which Finance Minister Pranab Mukherjee termed as "grave".

"(Food inflation)... is perilously close to double digits. These fluctuations are taking place and it is one of the areas of grave concern," Mukherjee told reporters here.

Food inflation, as measured by the Wholesale Price Index (WPI), was 8.84 per cent in the previous reporting week.

As per the Commerce Ministry data, prices of onions eased marginally, while gram, masoor, arhar, urad and poultry rates firmed up, on an annual basis.

"Food prices are an area of major and grave concern," Mukherjee said.

As per the WPI data, inflation in eggs, meat and fish eased to 13.17 per cent during the week as against 28.7 per cent, year-on-year. While onion prices was down to 17 per cent from 22 per cent last year, potato prices rose 15 per cent.

Experts said the food inflation may decline only later this year.

"We hope that inflation number will come down during November-December period due to a larger base effect," Standard Chartered Bank Senior Economist Anubhuti Sahay said.

KASSA India Director Siddharth Shankar said, "Global slowdown and RBI's tight monetary policy will keep a cap on the non-food inflation numbers."

Non-food articles, which include fibres, oil seeds and minerals, recorded an inflation of 12.89 per cent during the week ended September 17, down from 17.42 per cent in the previous week.

Anti-corruption crusader Anna Hazare seems set to take the virtual world by storm. He on Thursday became a blogger and even joined social networking sites Facebook andTwitter.

The blog, with posts in English, Hindi and Marathi, is titled "Anna Hazare Says" and can be accessed on: https://annahazaresays.wordpress.com.

In his inaugural post, Hazare wrote: "It is after a long time that I am directly communicating with you. Henceforth, it is from this blog that I will be constantly in touch with you."

"We started a movement demanding that JanLokpal Bill be passed in India and slowly the crusade spearheaded into a full-fledged non-violent revolution spilling on to the Ramlila Maidan," he added.

Hazare accused "some government agents" of creating an image that it was due to their "favourite ministers" that he gave up his fast in Delhi's Ramlila Maidan in August.

"It was only when my inner voice permitted me I broke my fast after getting assurance from the government. The reason I am clearing the misconceptions here is I came to understand some government agents tried to propagate and create an image that it was the handiwork of their favourite ministers that I gave up my fast.

"I came across articles of self-praise, interviews published by them. This is a false propaganda," Hazare said in his blog. Giving some insight into what transpired before he called off his 12-day-old fast for a strong Lokpal, Hazare wrote that till the last moment, the government tried to break the movement.

As talks progressed regarding calling off his fast, he said the people, who came to meet his team members, the middle-man, the minister all of them had "different versions, different assurances.

"It was the responsibility of the government that they scrutinies the people they had sent for negotiations whether they were corrupt or had clean image. That was for the government to think. I held talks with them considering they were Government representatives! The answers lay with the government," he said.

After Harare called off the fast, questions have been raised, particularly in media interviews, over the participation of Union minister Vilasrao Deshmukh, who is facing allegations in Adarsh scam, and Bhayyuji Maharaj in mediation.

The activist said he found the support of the people and his young friends as overwhelming as they came forward from every corner of the country and their cries awakened India from its deep slumber.

"Their cries not only shook the very roots of our country but people from world over who had fallen prey to injustice, corruption took active part in the movement.

"The entire movement was infectious. This was the beginning of a revolution. It was the beginning of India's second struggle for independence," Hazare said.

The 74-year old leader pointed out that Parliament gave an assurance that it would put forward some of the demands from the Jan Lokpal Bill and get them approved.

"But assurance doesn't necessarily mean law. A bigger fight awaits us," Hazare urged.

The activist warned that the movement still "has a long way to go and very soon it will acquire a non-violent, but intense flavour of a nation-wide revolution".

"To enable a one-to-one conversation with you I will soon embark on my journey throughout India. I will address problems faced by people at every step of life... Interactive communication on this blog will start very soon. You can share your queries, problems thoughts and emotions with me," Hazare appealed.

He also wrote on his blog that he has joined Facebook and Twitter.

Police probe Anil Ambani in graft case - report

Published on Thu, Sep 29, 2011 at 21:50 | Source : Reuters
By Frank Jack Daniel and Devidutta Tripathy
NEW DELHI (Reuters) - The Central Bureau of Investigation (CBI) is examining the role of tycoon Anil Ambani in a multi-billion dollar telecoms scandal that has rocked political and business elites, the Press Trust of India (PTI) news agency said on Thursday.
The 52-year-old billionaire is the highest-profile company executive to be touched by the investigation of whether lucrative radio spectrum and mobile phone licences were sold at below-market prices in return for kickbacks.
The scandal is the biggest of several corruption cases to emerge in Prime Minister Manmohan Singh's second term. It has damaged the government's credibility and thrown a spotlight on the behaviour of leading industrialists and politicians.
A lawyer for the Central Bureau of Investigation (CBI) told the Supreme Court that Ambani was now under investigation, after he was questioned earlier this year by police, according to PTI.
Three of his executives are already in jail accused of setting up a front company called Swan Telecom to gain valuable radio spectrum during the sale. A state auditor said the scandal cost the government up to $39 billion in lost revenues.
"The role of Ambani and other employees in relation to 9.9 the percent share in the Swan Telecom which was sold to Delphi is being probed," CBI lawyer K.K. Venugopal said, according to PTI.
A CBI source told Reuters the agency was currently collecting evidence and not yet directly investigating Ambani, who controls India's No. 2 mobile carrier Reliance Communications as part of his Reliance ADA group.
"In case there is anything we will investigate," said the source, who asked not to be named. "The probe is not over yet."
One of the country's most recognisable figures, Ambani is a teetotal marathon runner listed by Forbes as India's eighth richest man. He denies wrongdoing in the telecoms case. A Reliance ADA spokesman declined to comment on Thursday.
Ambani is the controlling shareholder of Reliance Communications and is part of the Anil Dhirubhai Ambani Group conglomerate which has interests from telecoms to energy and outsourcing.
He is the chairman and chief executive of the group companies. Reliance Communicatins shares fell 1.15 percent on Thursday to close at 77.60 rupees.
The CBI lawyer said the three jailed men had now retracted previous statements in which they had taken responsibility for decisions made in the Reliance unit they worked for, the news agency said.
"Suddenly they are going back on their statement and are now saying that they are only employees and in no way they benefited monetarily," Venugopal said.
"We are going to take our probe further to find out who are the real beneficiaries," he said, according to the news agency.
Revelations of graft in the telecoms license sales and during the buildup to the 2010 Commonwealth games in Delhi sparked the largest street protests in decades this August against a culture of kickbacks and favors between political and business elites and also sparked tensions in the federal cabinet.
(Reporting by Frank Jack Daniel, Abhijit Neogy, Arup Roychoudhury and Devidutta Tripathy; Writing by Frank Jack Daniel; Editing by Matthias Williams and Ed Lane)

Anil Ambani under scrutiny; Tata, Videocon clean in 2G scam:SC told
: The CBI on Thursday virtually gave a clean chit to Tata and Videocon groups in the 2G spectrum scam but said the role of Anil Ambani was being probed as three jailed corporate honchos of his company RADAG have distanced themselves from any wrongdoing.

The agency said it was conducting further investigation to find out the real beneficiaries as the arrested executives of the RADAG group have "resiled" from the statements given by them during the probe of the scam.

CBI, which refuted the allegation of not probing the role of corporate czars, said the three RADAG executives--Gautam Doshi, Surendra Pipara and Hari Nair--in their statements under section 161 of Code of Criminal Procedure had taken entire responsibility for the decision but in the Delhi High Court they retracted.

"They took responsibility in entirety for the decision but in the High Court (during bail plea) they said they were merely employees and did not receive any benefit," senior advocate K K Venugopal, appearing for the CBI, submitted before a bench of Justices G S Singhvi and A K Ganguly.

Giving detailed account of its probe into various allegations against Ambani, Tata Group, Videocon owned Datum and Attorney General G E Vahanvati in the 2G scam, the agency said that investigation was still on against Anil Ambani but it has not found evidence regarding the culpability of others in the scam.

Difficult to achieve fiscal deficit target: C Rangarajan
Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan on Thursday said the government is likely to miss the fiscal deficit target of 4.6 per cent for the current fiscal as growth is expected to moderate.

"In the current year, the budgeted fiscal deficit is 4.6 per cent (of GDP). It is going to be difficult to achieve this. All the numbers do not gel well," he said, while delivering lecture at golden jubilee celebration ofIndian Economic Service here.

"But I think it should be one of efforts to ensure that fiscal deficit is in the lines of what was estimated," he said.

The economic growth was earlier estimated at 8.2 per cent for the current fiscal.

Despite a stronger agricultural growth than what was estimated earlier, he said the economy is expected to grow about 8 per cent during the current fiscal as there are serious concerns.

"Therefore, taking all these factors into account, I believe the growth rate of the economy can be close to 8 per cent per annum," he said.

He said the potential growth rate of Indian economy is 9 per cent given the saving and investment rate.

Highlighting the challenges, Rangaranjan said, "I believe there are short-term concerns and medium-term constraints which will come in the way of achieving 9 per cent growth".

There are three short-term constraints -- one is inflation, the second is balance of payment and the third area is fiscal consolidation.

On rate of price rise, he said, "I believe even if inflation is triggered by supply side constraint monetary policy has important role to play".

When food inflation persist for some time then it gets generalised, he said, "In fact today the non-food manufacturing index exceed 7.5 per cent. Therefore, we should be using monetary policy to tame inflationary expectations," he added.

Defending the number of rate hikes effected by the Reserve Bank, he said, "We should use monetary policy in way that demand preference is brought down".

Since March 2010, the central bank has raised policy rate 12 times to tame inflation.

On the Current Account Deficit (CAD), he said, "I don't think that by taking both imports and exports of goods and services taken together we might exceed 2.5 per cent of GDP of the CAD this year."

Why Pranab's statement doesn't end row over PC's 2G role

Last updated on: September 29, 2011 21:32 IST

'Need to moderate dependence on capital flows'

K.R. SRIVATS

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NEW DELHI, SEPT 29:

India must moderate its dependence on capital flows for financing of its current account deficit, Dr C. Rangarajan, Chairman of Prime Minister's Economic Advisory Council, said here today.

"We must try to ensure that the current account deficit in the next five years does not exceed the manageable level of 2.5 per cent of GDP," he said at an event here on Thursday.

Keywords: capital flows, current account deficit, C. Rangarajan, Prime Minister's Economic Advisory Council

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Twin cities go without papers as hawkers join general strike MSMEs decry frequent hike in interest rates ‘Banking sector to offer 4-7 lakh jobs'President leaves on State visit to Switzerland, Austria today Kerala to regularise 3,389 teacher posts http://www.thehindubusinessline.com/industry-and-economy/economy/article2496559.ece

Govt to borrow Rs 52,872 cr more in the next six months

OUR BUREAU

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Business LineMr R. Gopalan, Secretary, Economic Affairs

NEW DELHI, SEPT. 29:

The Government will borrow Rs 2.20 lakh crore for the second half (October 2011-March 2012) of the current fiscal. This is nearly Rs 53,000 crore more than the budgeted amount.

The Economic Affairs Secretary, Mr R. Gopalan, said that the additional borrowing was because of lower Government cash balances and the net outflow of small savings. But there will be no change in the fiscal deficit target of 4.6 per cent for the current fiscal year, he added.

The Government is also certain that the extra borrowing will not affect private investment. “The borrowing calendar has been prepared in such a manner that it will not crowd out private sector investment,” a senior Finance Ministry official said.

Revenues have been under pressure as disinvestment has dried up and there are no revenues of the “3G fees kind' this fiscal. Also, with higher interest rates on the bank deposits, money has shifted there from small savings. The net outflow is approximately Rs 11,000 crore.

The Government was expecting Rs 24,182 crore through small savings but there has been no fresh accretion till date.

As for cash balances, the Government has budgeted Rs 33,000 crore as the opening balance but this came down to Rs 16,000 crore. This is also a cause for the extra borrowing in the second half.

Analysts say that the advance tax collection for the quarter ending September 15 clearly reflected the slowdown. This could affect the corporate tax collection as well as excise tax.

Meanwhile, higher borrowing has led to decline in the bond prices. Even announcements like less borrowing through the treasury bills and completion of the auction by February could not lift prices. Lower prices helped the yield on the benchmark 10-year gilt to touch an eight-week high after traders sold due to higher than expected bond supply.

Shishir.s@thehindu.co.in

Keywords: government borrowing,

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TN Governor unveils foundation stone for skill development centre 50 deals signed at DST-Lockheed Martin innovation expo Montek calls meeting on Oct 3 to discuss poverty numbers ‘Multi-faceted' approach needed to fight corruption: Pranab Cabinet may consider mining Bill tomorrow

http://www.thehindubusinessline.com/industry-and-economy/article2497590.ece?homepage=true

GoM for clearance to power projects on case-to-case basis

PTI

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NEW DELHI, SEPT 28:

The Group of Ministers on coal and environmental issues hurting power generation in the country is believed have accepted the recommendation of the B K Chaturvedi Committee for granting clearance to projects in environmentally sensitive zones on a case-to-case basis.

“The B K Chaturvedi report has been accepted by the Group of Ministers... But that does not mean that all the projects in the “no-go” area will now automatically fall in the ‘go’ area, they would be dealt with on a case-to-case basis,” a Power Ministry official told PTI.

However, another ministry official said the issues highlighted by the Chaturvedi Committee have almost been resolved and the Power Ministry is awaiting the minutes of the meeting of the Group of Ministers.

The Chaturvedi Committee had said that the ‘no-go’ and ’go’ classification of areas has no legal sanctity and clearance of coal blocks for power projects should not be based on that.

In 2009, the Ministry of Environment and Forests (MOEF) had categorised 203 coal blocks as “no-go” zones, which meant that mining activities cannot take place in those areas as they may prove detrimental to the environment.

The output from these blocks could generate around 1.3 lakh MW of power per annum, as per the estimates of the Coal Ministry.

The Power Ministry may miss its target of adding 62,000 MW of electricity by the end of the current Five-Year Plan (2007-12), as some of the projects have been stalled due to the “no-go” and “go” issue.

In the previous meeting of the GoM, the matter of relocating NTPC’s 1,980-MW North Karanpura plant from coal-bearing region in Jharkhand was referred to a sub-committee.

The sub-committee, headed by Planning Commission member Mr B K Chaturvedi, will submit its report on the issue to the GoM within a month.

The proposed relocation of the proposed power plant of NTPC, as the plant is planned in an area that has six billion tonnes of coal reserves, has been hanging fire because of a divergent views expressed by the ministries of coal and power on the issue.

The Coal Ministry has argued in favour of relocating the proposed plant, but the Power Ministry has opposed the move, following which the matter was referred to the ministerial panel earlier this year.

Keywords: B K Chaturvedi report, GoM, power, case-to-case basis, no go areas

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BJP ridicules Pranab-Chidambaram patch-up, repeats demand for resignation

Home Minister P Chidambaram.

Even as the rulingCongressheaved a sigh of relief as two senior Ministers -Pranab Mukherjee and P. Chidambaram- announced that the 2G note controversy was over, the BJP continued with its attack on the Home Minister demanding his resignation for his alleged role in the spectrum allocation scam.

The main opposition party hit out at the government immediately after the joint statement by both the warring ministers on Thursday evening. BJP spokesperson Ravi Shankar Prasad said thatChidambaramaccepting the finance minister's clean chit was laughable as he was culpable in the 2G case.

"Had P. Chidambaram taken pre-emptive and prohibitive measures as expected from him, the 2G scam would have been avoided. This is not an issue of ego battle between ministers, it is a question of the loot of lakhs of crores of public revenue," Prasad said.

"This unacceptable justification of Mukherjee is more a result of the ego clashes of the two ministers than it being an issue of public money," he added.

Continuing with his attack, Prasad said the BJP never said that the 2G note was Mukherjee's thought. "It was drafted after due consultations with concerned ministries. Who is Chidambaram to say openly that he accepts Pranab's statement," he asked insisting that his party demanded Chidambaram be dropped and CBI inquiry be held against him.

On Mukherjee's statement that the UPA government's policy in 2007-2008 was "continuation of the policy adopted (by the NDA government) in October 2003," Prasad said, "To blame NDA is also ridiculous. BJP rejects this statement and end of ego clash between ministers. Those who looted public money be punished."

Pranab seeks civil society help in tackling corruption

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nion Finance Minister Pranab Mukherjee on Thursday asked the civil society and private players to shoulder some responsibility in achieving “zero tolerance” in this regard. File photo

PTInion Finance Minister Pranab Mukherjee on Thursday asked the civil society and private players to shoulder some responsibility in achieving “zero tolerance” in this regard. File photo

We are committed to making progress in our fight against graft

Admitting that there is “slackness” in implementing laws pertaining to corruption and a lack of coordination between investigating agencies, Union Finance Minister Pranab Mukherjee on Thursday asked the civil society and private players to shoulder some responsibility in achieving “zero tolerance” in this regard.

In his valedictory address at the concluding session of three-day conference of the ‘Seventh Regional Conference of the ADB-OECD Anti-Corruption Initiative for Asia and the Pacific Region' here, Mr. Mukherjee said: “There are issues of slackness in implementation of existing laws, ineffectiveness of some laws, lack of coordination between different agencies that have overlapping mandates, policy gaps such as in the area of election funding and governance failure in several areas of public services delivery, that have contributed to the pervasiveness of this phenomenon.”

In a way lauding the agitation launched by civil society activist Anna Hazare in the recent past over the Lokpal Bill aimed at tackling corruption at all levels, Mr. Mukherjee said: “We are committed to making progress in our fight against corruption. It is also important that other stakeholders, including the private actors and the civil society, come forward in shouldering some responsibilities and contribute to the efforts of public agencies in this endeavour.”

Even as he listed the government departments that are engaged in checking corruption, he pointed out that it did not mean that the country was free from corruption. “Indeed, corruption is widespread and deep-rooted in our society…At the same time, we are one with the global community in sharing the responsibilities in our collective efforts to address this issue in its international dimension,” he said.

Mr. Mukherjee stressed that effective international cooperation had now become an essential part of any framework against corruption in the context of the current globalised environment. “We need to engage with each other at different levels to effectively block all physical escape routes for those blatantly propagating corrupt practices ... It is a war that has to be fought on all fronts and in a concerted and coordinated manner by all stakeholders,” he said.

Symptomatic solutions would provide only temporary results while the need was for having a comprehensive framework against corruption. “We are committed to the goal of achieving zero tolerance against corruption.” He referred to the amended tax treaty with Switzerland — among others which have been inked with other countries — which has been accorded approval by the Swiss Parliament recently. “As soon as Switzerland completes its internal process, the treaty shall come into force and will allow India to obtain banking information from Switzerland in specific cases.”

Keywords: Union Finance Minister, Pranab Mukherjee, anti-corruption campaign, civil society

http://www.thehindu.com/news/national/article2497806.ece

Pranab, Chidambaram declare truce at Sonia's diktat

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Union Finance Minister Pranab Mukherjee with Union Home Minister P. Chidambaram, Minister for Information Technology, Kapil Sibal and Minister for Law and Justice, Salman Khurshid coming out to address the media in New Delhi on Thursday. Photo: S. Subramanium

The HinduUnion Finance Minister Pranab Mukherjee with Union Home Minister P. Chidambaram, Minister for Information Technology, Kapil Sibal and Minister for Law and Justice, Salman Khurshid coming out to address the media in New Delhi on Thursday. Photo: S. Subramanium

Pranab claims that the "inferences and interpretations" in the inter-ministerial background paper do not reflect his views

Union Finance Minister Pranab Mukherjee and Home Minister P. Chidambaram buried the hatchet on Thursday.

Standing on the steps of North Block — which they jointly preside over — a glum Mr. Mukherjee read out from a brief statement, stressing that the “inferences and interpretations” in the inter-ministerial background paper on the 2G spectrum allocation issue did not reflect his views. Seconds later, a grim Mr. Chidambaram stepped up to say he was “happy” with the statement of his “senior and distinguished colleague.”

Adding to the optics of solidarity and unity, their Cabinet colleagues, Kapil Sibal and Salman Khurshid, stood behind the unhappy duo.

The truce between the two apparently warring Ministers came at the end of a day of high-level confabulations, with Congress president Sonia Gandhi taking the lead in resolving the situation. Party sources said she made it clear that she did not want the issue to fester any longer — the sight of a government at war with itself was causing it incalculable damage. A public explanation about the Finance Ministry's note was imperative; it was not enough for un-sourced clarifications on the provenance of the note to appear in the media.

In the morning, Ms. Gandhi first met Defence Minister A.K. Antony, and then Mr Mukherjee — her political secretary Ahmed Patel was in attendance. In the evening, Mr. Chidambaram and Mr. Mukherjee drove to 7, Race Course Road to confer with Prime Minister Manmohan Singh, shortly after he returned from the earthquake-struck Sikkim. Dr. Singh's Principal Secretary T.K.A. Nair was also present at this meeting. At 6 p.m. came the joint photo-op by Messrs Mukherjee and Chidambaram. Shortly thereafter, Ms. Gandhi drove to 7, Race Course Road to meet the Prime Minister.

With Mr. Mukherjee's explanation, the government stepping up its defence of Mr. Chidambaram's role in the 2G spectrum allocation in the Supreme Court on Thursday, stressing that he alone could not have blocked the license route being adopted, and the next hearing slated for October 10, the Home Minister appears to have got a reprieve. But Congress sources said this episode had left both Ministers bruised — and this may not be the end of the story.

Keywords: 2G case, CBI probe, Finance Ministry note, Pranab reaction, Chidambaram, Manmohan Singh

http://www.thehindu.com/news/national/article2496637.ece

Denial of funds to UIDAI not a setback: Nandan Nilekani
Unique Identity Authority chairman Nandan Nilekani Thursday said that the finance ministry's decision to deny more funds to the authority was not a setback.

The finance ministry has declined the Nilekani-led Unique Identity Authority's (UIDAI) demand to allow it to collect biometric data for the entire population from the earlier mandated 200 million. To meet the task, theUIDAI had asked that its outlay be increased to close to Rs.18,000 crore.

The current outlay is about Rs.3,023 crore.

At the first anniversary of Aadhaar launch, Nilekani, however, said the rejection was not a setback.

"One of our biggest supporters, the finance minister has been extremely gracious and supportive, and he has always sent me the message that we should do this as fast as we can," Nilekani told reporters at the first anniversary of Aadhaar launch.

"What the finance ministry has done is that essentially they had said that you can enrol up to 200 million and beyond 200 million the cabinet has to decide what the exact modality will be. We have absolutely no issues and we have got fantastic support from the finance ministry," he added.

Speaking about the enrolments, Nilekani said that the 12-digit unique identity number -- Aadhar -- has been provided to 37 million people across the country and very soon over one million people will enrol for unique identity number every day.

The organisation is also planning to come up with a system to enable applicants to call and get prior appointments before coming to the registration centres to avoid chaos.

"The software is ready and we will roll out the service in a weeks time, first in Delhi and then in other places as well," said R.S. Sharma, director general and mission director, UIDAI.

Aadhaar a valid residence proof for opening bank account:Nandan Nilekani

The unique identification authority on Thursday said the I-cards issued by it-- known as Aadhaar-- are a valid residence proof for opening a bank account.

Commenting on media reports that Aadhaar is not a valid residence proof, Unique Identification Development Authority of India (UIDAI) ChairmanNandan Nilekani said, "That is not true. That is some report which is misleading. Aadhaar is a valid 'Know Your Customer' (KYC) document for opening a bank account."

"Aadhaar letter has two parts-- identity and address. If the address which a person shows to the bank, is the same address as on the (Aadhaar) letter, then it is also a proof of residence."

A section of media had reported that as per theReserve Bank of India (RBI) notification issued on Wednesday, Aadhaar is not a valid residence proof. However, the central bank reportedly accepted its validity as identity of a person.

Nilekani said, "In a few days, we will be starting online authentication of address and identity. If the address matches through online authentication, then it will be treated as current address (of the person applied for a bank account or a service)."

Clearing air on the issue, he said: "The government is a set of institutions and all of them take their own decisions. As of now, the banking system has declared Aadhaar as a valid KYC norm for all bank accounts as per the RBI notification issued yesterday.."

He also said that the Department of Telecom and the Ministry of Petroleum and Natural Gas also consider Aadhaar as valid KYC for issue of sim cards and cooking gas connections.

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26 SEP, 2011, 05.24PM IST, PTI

Poverty line at Rs 32: Percentage of poor declining in the country, says Planning Commission

NEW DELHI: Amid public outcry over pegging urban poverty line at per capita consumption of Rs 32 a day,Planning Commission today said the percentage of poor is declining in the country.

"...the percentage of people who are poor today is declining, whether you use the Tendulkar method or the method used previously," Plan panel Member Arun Maira told reporters on the sidelines of an Assocham function here.

The statement follows an uproar over Plan panel's recent calculation of poverty line based on the Tendulkar methodology, which also include spending on health and education, besides calorie intake.

In its affidavit before the Supreme Court, the Planning Commission has stated that a person with consumption of up to Rs 32 per day would be considered poor in urban areas. The per capita consumption limit in rural area has been fixed at Rs 26 a day.

The Tendulkar panel, Maira added, "was asked to (suggest) a measurement method for a broad assessment of whether Government programmes are improving situations or not."

He said that poverty is relative concept and comparing today's poverty with that of the past would be incorrect.

"I believe that even a person who is getting Rs 15,000 (per month) today, is poor. Poverty is a very relative thing too... So, poverty level is also defined by what is happening to the rest of the country", he added.

As per Plan panel's estimates, based on the Tendulkar Committee's methodology, 40.74 crore people were poor as on March 1, 2005. India's population is 121 crore as per the 2011 Census.
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http://economictimes.indiatimes.com/news/economy/indicators/poverty-line-at-rs-32-percentage-of-poor-declining-in-the-country-says-planning-commission/articleshow/10127372.cms

Pranab-Chidambaram put up united front over 2G note

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New Delhi: Finance Minister Pranab Mukherjee and Home Minister P Chidambaram put up a united and brave face on Thursday and sought to put an end to the controversy over the note on 2G spectrum allocation scam that the Finance Ministry had sent to the Prime Minister's Office.
Mukherjee, flanked by Chidambaram, Telecom Minister Kapil Sibal and Law Minister Salman Khurshid, addressed the media at the North Block in New Delhi and claimed that the controversial note was just a background paper on the 2G spectrum allocation issue and nothing more.
Reading out from a prepared text, Mukherjee said, "A number of stories on 2G have appeared in 2011. A view was taken that a harominsed note based on facts be produced by various representatives of the government."
"A background paper was prepared and sent to the PMO. The papers contain certain interpretations," he said but significantly added that the inferences in the note were not his views.
"Apart from the factual background, the paper contains certain inferences and interpretations which do not reflect my views. The policy of the government in 2007-2008 was continuation of the policy adopted in October 2003 and as reiterated by TRAI," he said.
After Mukherjee finished reading the statement Chidambaram called him a senior and distinguished colleague.
"I am happy with the statement made by my senior and distinguished colleague," said Chidambaram.
They refused to take any question from the media after the statement.
The decision to make a statement was taken after Mukherjee and Chidambaram met Prime Minister Manmohan Singh. The meeting at the Prime Minister 7 Race Course Road was also the first one between Mukherjee and Chidambaram after the 2G note controversy.
Khurshid and Minister of State in the PMO V Narayanasamy also met Chidambaram for about 20 minutes. "All is well. Don't worry," Khurshid said after the meeting.
It became clear that the Government was keen put an end to the controversy over the note and reports of rift between two of its senior-most ministers after Chidambaram went to meet Mukherjee in North Block.
Mukherjee and Defence Minister AK Antony had also met Congress President and UPA Chairperson Sonia Gandhi where it was decided that Chidambaram should be defended legally.
Sonia's Political Secretary Ahmed Patel, too, was present at the meeting.
The Finance Ministry note dated March 25, 2011 had said that the 2G scam could have been avoided had Chidambaram, the then finance minister, insisted on auctioning of spectrum instead of giving it on 2001 prices as was being done by former telecom minister A Raja.
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http://ibnlive.in.com/news/2g-note-just-a-background-paper-pranab/188710-37-64.html

29 SEP, 2011, 05.09AM IST, ET BUREAU

2G scam accused Reliance Telecom cite law ministry opinion

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NEW DELHI: The accused in the 2G case asked a Delhi court to let them off citing an opinion from the law ministry, which strengthened their stance.

Earlier this month, the law ministry said that a company can be an 'associate' of another only if it is a subsidiary, and that two firms can be associates of each other if a parent company owns more than 50% stake in both.

A total of 17 officials from telecom companies, government officials and former telecom minister A Raja are being tried for corruption in allocation of 2G licenses in 2008.

S Ganesh, Reliance Telecom's legal counsel, told the CBI Special Court that the company held 9.9% shares in Swan Telecom, but at the time of granting of licence it did not hold any shares, which means it was not an associate.

"The opinion of the Ministry says the date on which a company applied for the licence is irrelevant and the only thing which matters is the date when actual licence was granted," Ganesh told Special CBI Judge OP Saini.

Legal counsel of accused in the 2G case are arguing on an opinion from the law ministry to the DoT. This definition holds the key to the 2G case as it forms the core of the charges filed by the CBI against the top brass of Swan Telecom and three executives of theReliance ADA Group and could possibly collapse the prosecution's case.

The law ministry's opinion stands in contrast to CBI's charges that Swan Telecom was an associate firm ofRTL.
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http://economictimes.indiatimes.com/news/news-by-industry/telecom/2g-scam-accused-reliance-telecom-cite-law-ministry-opinion/articleshow/10164966.cms

28 SEP, 2011, 07.09AM IST, C L MANOJ,ET BUREAU

2G spectrum scam: Curiously transparent PMO

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There can be two ways of looking at the latest mess on the 2G spectrum front in the form of the Prime Minister's Office supplying a sensitive note to a request under the Right to Information (RTI) Act.

The widely-held view locates the root of this mess in rivalry between finance minister Pranab Mukherjee and home minister P Chidambaram, stemming from presumed prime ministerial ambitions when Dr Manmohan Singh faces serial crisis. Another explanation is yielded by the final outcome of the controversy: clipped wings and clipped ambitions for putative challengers to Dr Singh's position.

We may never get clarity as to which of these possibilities, or something else, was actually at work when a PMO official passed the internal note, prepared by the finance ministry for the consumption of Dr Singh and his team, to an RTI activist who also happens to head BJP's RTI cell! Congressmen love conspiracy theories and the air over the Congress headquarters is thick with fancy theories.

The way a PMO official released, as coolly as one hands over car key to a friend, a delicate internal note to the RTI network, exposing the home minister to risk is baffling. This is nothing but death-wish unless PMO thinks its top priority is to make the Prime Minister the darling of the RTI fans.

Adding to the mystery is the fact that this note was not Pranab Mukherjee's unilateral exercise but the result of a series of interactions and discussions the officials of the PMO and the finance ministry have had. It is testimony to Dr Singh's character that not even his worst critics have, so far, accused him of being silly or a schemer against colleagues.

Of course, the Congress flaunts RTI in a big way even though UPA regime has been a major victim of RTI's sting. Whether one likes it or not, the fact is that state governments and ministers have been shielding their self-interest when it comes to dealing with RTI queries for sensitive information.

The recent killing of an RTI activist in BJP-ruled Madhya Pradesh triggered reports of how she had been pushing for sensitive informations about senior ministers. Left leaders may have been quick in seeking Chidambaram's resignation even though their own erstwhile West Bengal government had stonewalled all RTI inquiries about its deal with Tatas in Singur. Till today, there is no evidence of RTI becoming a poll plank unless the PMO wants to go to polls next time flaunting its transparency record.

Dr Singh has had the opportunity to learn under the very astute late P V Narasimha Rao. When the PM is set to complete seven-and-half years in office, it is worth recalling how Rao had dealt with his own eventful years in office. Like Dr Singh, Prime Minister Rao too was a great hit on foreign turf, for his positioning of India in the post-USSR world and for economic reforms.

On the domestic front, his handling of Punjab militancy was widely admired. Though Rao suffered for trusting Kalyan Singh on Babri masjid, he personally brokered an alliance between Mulayam Singh and Kanshi Ram to ensure BJP did not win the next UP elections that, otherwise, would have been projected as popular endorsement of the mosque demolition. Similarly, Rao also rallied Congress satraps of MP and HP to ensure BJP could not script 'a revenge victory' in these states when elections were held a year after the demolition of the mosque.

Despite such political manoeuvring, he finally lost mainly due to two self-inflicted wounds. A wrong alliance in Tamil Nadu might have done him in in numbers game, but Rao started losing when the public started perceiving his government as corrupt - even though Rao cleared his name in each case - and, more importantly, when he lost the support of his own party colleagues after a split led by N D Tiwari and the mysterious Jain hawala diary episode.

But even as the UPA regime is battling a series of corruption charges, Dr Singh, still, has two major advantages that Rao lacked: an Opposition, torn in leadership/programmatic crises and, on the internal front, the backing of Sonia Gandhi.

How unpredictable the twists in corruption politics can be was demonstrated on Tuesday when the BJP brass, all eager to hear 'bad news' for Chidambaram from the court, ended up watching their own warrior Sudheendra Kulkarni heading to Tihar jail.

As the BJP learns its own courtroom lessons, Dr Singh too should, in the wake of the RTI exposA©, learn from the Rao experience; that the best shield in the time of political and legal tests is to put your own house in order by uniting the core team, leaving no scope for fatal divisions among the generals. For that, the PMO should start functioning more as a political command than an RTI clearing house.
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Where Is Manmohan Singh?

New Delhi's leadership vacuum prompts feuds and confusion.

A feud within India's cabinet has all of New Delhi wondering whether the Congress-led government will implode. Recent corruption scandals have weakened public support, and now top ministers are squabbling over who is to blame. Meanwhile, Prime Minister Manmohan Singh appears to be in hiding.

According to a memo leaked last week, Finance Minister Pranab Mukherjee claims his predecessor, Palaniappan Chidambaram, could have halted the sale of telecom spectrum at below-market prices in 2008. Mr. Chidambaram, now home minister, reportedly offered to resign late last week, though the Congress Party is now rallying around him.

That 2008 sale is turning out to be the biggest graft case in India's history. The national auditor estimates that because then Telecom Minister Andimuthu Raja sold licenses on a first-come, first-served basis, instead of an open auction, the exchequer lost $39 billion.

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Manmohan Singh

The problem is Mr. Singh hasn't stepped forward to clarify how this happened. His past comments suggest that he knew how Mr. Raja was selling licenses. If the manner of selling spectrum was legitimate—and if it should be used for the sale of other natural resources—Mr. Singh isn't strongly defending it. If it was wrong, he refuses to take responsibility. In this vacuum, his deputies are passing the buck.

Such weakness at the top is spelling confusion elsewhere. Take the issue of opening the multibrand retail industry to foreign investment. New Delhi has dangled this possibility for years, and the will-they-or-won't-they game continued this week as an official acknowledged that differences among various ministries were holding up the reform. Similarly, this week saw infighting over the lucrative pharmaceutical business, with some parts of the government pushing to limit overseas investment, while another rightfully resists.

In these cases, investors are left jittery, since Mr. Singh hasn't put his foot down one way or the other. This lack of direction is a big reason much-needed reforms are delayed, hurting economic growth. And in some cases, India is left embarrassed on the international stage: In 2009, Indians saw Mr. Singh waffling on the country's position on carbon emissions in the run-up to Copenhagen because of competing voices in his administration.

Few politicians like making tough choices, but even in that company Mr. Singh stands out for avoiding them. The buck never really stopped with him in the first place, because Congress President Sonia Gandhi holds the true political reins. Still, Mr. Singh's abdication of responsibility and his aversion to risk is striking today, not least because it encourages others in India's government to go into hiding the moment there's a sign of trouble.

http://online.wsj.com/article/SB10001424052970204226204576600363108398224.html

The CBI is likely to register an FIR to investigate various irregularities by a Mauritian firm in executing a Rs 70 crore contract related to the Commonwealth Games.

The investigating agency has already registered a Preliminary Enquiry (PE) in the case.

Acting on the recommendation by the Prime Minister's Office, the Sports Ministry has sent a letter to CBI asking it to probe the antecedents, flow of funds and works carried out by Event Knowledge Services (EKS), a Mauritius-based international private consultant, for alleged wrongdoings.

EKS was given three contracts of over Rs 70 crore by the Games Organising Committee to extend consultancy services for the venue development and management, games workforce, and games planning and project management services.

"PE has been registered and it will be converted into an FIR soon," a CBI official said.

Prime Minister Manmohan Singh-appointed Shunglu Committee has found gross irregularities by EKS and recommended a probe by the CBI and Enforcement Directorate.

Taking a serious view of the High Level Committee's findings, the PMO had suggested a probe by the CBI andEnforcement Directorate into charges against the firm to the Sports Ministry.

The Committee in its report estimated financial loss of over Rs 18 crore to the government due to alleged irregularities in granting workforce contract.

The Prime Minister had on October 25 last year appointed the High Level Committee under the chairmanship of former Comptroller and Auditor General V K Shunglu to investigate and report all irregularities in executing various projects by several government agencies during the mega sporting event held here between October 3-14 last year.

Bill introduced in US House to freeze all aid to Pakistan
WASHINGTON: A key American lawmaker from Texas has introduced a resolution in the House of Representative to freeze all US aid to Pakistan.

The House Resolution (No HR 3013) if passed will freeze all US aid to Pakistan with the exception of funds that are designated to help secure nuclear weapons.

"Since the discovery of Osama bin Laden inAbbottabad, Pakistan has proven to be disloyal, deceptive and a danger to the United States," Congressman Ted Poe said in a statement after tabling the resolution in the House on Friday.

"This so-called ally continues to take billions in US aid, while at the same time supports the militants who attack us.

"The United States must immediately freeze all aid to Pakistan," said Poe, who is a member of the House Committee on Foreign Affairs.

Pakistan has made it "painfully obvious" that they will continue their policy of "duplicity and deceit" by pretending to be US ally in the war on terror while simultaneously promoting violent extremism, the Congressman said.

According Mike Mullen, Chairman of the Joint Chiefs of Staff, just this month the Pakistani government supported the groups who were behind both the truck bomb attack that wounded more than 70 US and NATO Troops and the attack on the US Embassy, Poe said.

The resolution has been sent to the House Foreign Affairs Committee for necessary action.

It is only after this key Congressional committee approves the resolution that it will be sent to the House of Representatives.

27 SEP, 2011, 05.08PM IST, PTI

More than 7,200 Indian Jews to immigrate to Israel

JERUSALEM: The Israeli government is expected to approve the long awaited 'aliyah' (immigration) of more than 7,200 Indian Jews from the north-eastern states of Manipur and Mizoram in the coming weeks, a media report said.

The decision to allow the last members of the "lost" Bnei Menashe tribe to immigrate to Israel is being greeted with excitement by local Evangelical Christian groups, who view it as fulfillment of Biblical prophecy and who have pledged financial support for the move, 'The Jerusalem Post' daily reported.

The Ministerial Committee on Immigration and Absorption, headed by Foreign Minister Avigdor Lieberman, decided, about three months ago, "in principle" to bring the remaining 7,232 members of the northeastern Indian community to the Jewish state

"I am very optimistic that within the next few weeks we will at last have a historic breakthrough which will allow the lost tribe of Bnei Menashe to return to Zion," Michael Freund, founder and chairman of Shavei Israel, a Jerusalem-based organisation that has been at the forefront of Bnei Menashe immigration to Israel, was quoted as saying.

More than 1,700 members of the north-eastern Indian Jewish community, referred as Bnei Menashe (sons of Menashe), have immigrated to Israel over the last decade, but their aliya was subsequently halted in 2007 over the issue of their "Jewishness", even though the Israeli Chief Rabbinate had earlier recognised the community as "descendants of Israel".

The community claims descent from one of the 10 lost tribes of Israel, who were sent into exile by the Assyrian Empire more than 27 centuries ago.

Their ancestors are believed to have wandered through Central Asia and the Far East for centuries, before settling in what is now northeastern India, along the border with Burma and Bangladesh.

27 SEP, 2011, 12.14PM IST, VIRAJ DESAI ,ET BUREAU

National Highway Authority of India plans swanky makeover of 10 highways across 11 states

27 SEP, 2011, 12.14PM IST, VIRAJ DESAI ,ET BUREAU

National Highway Authority of India plans swanky makeover of 10 highways across 11 states

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NEW DELHI Your long drive on highways is set for a smooth and swanky makeover with National Highway Authority of India deciding to set up foodcourt complexes, multiplexes, ATMs and amusement parks every 50 km on major routes to help you unwind and recharge.

To start with, NHAI will develop 60 service plazas on major highway stretches, and set up complexes every 50-60 km along the roads. It will kick off the plan next month and invite bids for 27 sites of 2-5 hectares each on 10 highways across 11 states, to be developed in two years.

The highways would also have security systems, andSiemens has already signed an MoU with a subsidiary of Reliance Industries to develop such facilities in roads and cities. Ten years ago, Siemens had earlier tested waters with a pilot project when it installed emergency call boxes, television cameras along a stretch of Delhi-Jaipur highway.

For the new complexes and plazas being planned, NHAI will offer a 30-year lease and assist developers in dealing with local bureaucracy, an NHAI official said. "Since states have different bylaws, we are considering helping the lessee in every possible manner and also giving concessions," the NHAI official added. As per the prevailing criteria, the developer should have experience of running chain of restaurant, fuel stations or amusement parks for three years. Analysts say there is a big business opportunity to be exploited.

"There is a big business opportunity for hospitality and restaurant operators. Learning from its experiences, NHAI has relaxed some norms and sweetened the deal for private sector for better participation," said Abhaya Agarwal, Executive Director and Leader PPP at Ernst & Young.

And the move has excited fast-food and coffee retailers such as McDonald's and Cafe Coffee Day who have already hit the road with grand plans. McDonald's, one of the world's largest chains of fast-food restaurants having 235 outlets across India, plans to double the count over the next few years. It is expected that 30% of its new restaurants over the next three years would come up on the highways.

"Highways are a huge opportunities for us. And we recognise it as one of the top five strategic priorities. In fact, we have been steadily growing our presence on the highways, said official spokesperson of McDonald's India (North & East). Cafe Coffee Day, a part of India's largest coffee conglomerate, is too brewing plans to cash in on the opportunity.

In fact, it had sensed the growing opportunity almost six years back, and now has 40 highway outlets. "The average business at these outlets is as much as city outlets and we sense huge opportunity. Although there are supply side constraints like inadequate cold chain network, but we know that road infrastructure is on the upside," said K Ramakrishnan, President-Marketing, Cafe Coffee Day.

NHAI officials say the new plazas would be developed systematically with facilities for a wide spectrum of users ranging from the urban elite in luxury cars and SUVs to long-distance truck drivers. NHAI is planning to develop three types of wayside amenities and will delineate facilities for different kind of people.
http://economictimes.indiatimes.com/news/economy/infrastructure/national-highway-authority-of-india-plans-swanky-makeover-of-10-highways-across-11-states/articleshow/10134216.cms

28 SEP, 2011, 07.34AM IST, ET BUREAU

Finance ministry aims to bring transparency, market based pricing in public-private partnership projects

NEW DELHI: The finance ministry has proposed auction of all public-private partnership projects that grant exclusive rights over any natural resource, a move aimed at bringing in transparency and efficiency in award of infrastructure contracts. The ministry, which unveiled a draft national policy for award of infrastructure projects on Tuesday, is keen to have a watertight framework to avoid any adverse comment by statutory authorities such as the Comptroller and Auditor General.

"The policy seeks to provide a comprehensive framework for implementation of PPP projects ," said a ministry official. The ministry proposes that all such PPP projects would have to follow some market-based price discovery mechanism. It suggests creation of a dispute resolution mechanism and a substantive role for PPPs to harness private sector investment and operational efficiencies in the provision of public assets and services.

According to the proposal, the government will publish separate mandatory disclosures and fair practices that all PPP projects would have to follow. It will also develop new market-based products such as independent pre-bid rating to assist investors in identifying well-structured PPP projects and explore possibilities of setting up a web-based marketplace.

The policy, promised by finance minister Pranab Mukherjee in his budget speech, spells out government's stance on unsolicited bids for the first time. It proposes that in exceptional circumstances , in sectors not traditionally associated with PPP structures or where procurement of proprietary technology is involved , variants of unsolicited bidding, or 'Swiss Challenge' as its popularly called, could be considered with prior approval of the competent authority.

Although some states such as Punjab, Gujarat and Andhra Pradesh have put in place laws for implementing PPP projects, a need was felt for a national policy in line with government's thrust on executing more projects using this mode. Experts say this will bring about consistency in the overall PPP framework. "This is a positive development ... The policy sets the stage for moving to next level in PPP, that is, bringing operational efficiencies in creating public assets ," said Vinayak Chatterjee, chairman, Feedback Infra.

The Planning Commission has set an ambitious investment target of $1 trillion for infrastructure creation during the Twelfth Five-Year Plan and more than half of this investment is expected to come from the private sector. "The PPP policy is a good collection of all the initiatives so far and some future commitments... (including) using competitive dialogue process to bring in innovation and design from private sector and this will be important for mega projects going forward," said Abhaya Agarwal, leader, PPP, Ernst & Young.

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Unemployment and Social Exclusion

The concepts of unemployment and social exclusion are mutually interlinked. It has been observed that unemployment leads to irregularities in the income pattern within huge sections of the society. This in turn implies that the individual, who has lost his job or is about to lose his job faces economic hardship.Successive periods of unemployment may lead to social exclusion under extreme circumstances. Even though, most of the times such situations are more psychological in nature and are results of the perceptions of the unfortunate individual.

In case an individual is unemployed there are chances that individual would receive financial assistance from a variety of sources. Nowadays, the unemployed people can get financial aid in the form of unemployment insurance programs. However, there is only a certain period of time, till which the individual may be insured against unemployment.

These options are available in the United States of America and in many other countries of the world. The insured has to make sure that he is able to procure a job in the meantime. If he is unable to do so he would have to look for other avenues of financial assistance.

It may happen that the unemployed worker fails to be gainfully employed within the period of insurance coverage. Once the unemployment insurance schemes get expired, the jobless workers find themselves under tremendous hardship. Under this situation they have no other option left but to borrow and it is also obvious that they fail to repay within the stipulated period of time.

This in turn makes sure that the individual is caught in a debt trap, a vicious cycle that keeps on repeating itself and from which the individual can hardly come out. The credit records of these individuals are damaged to an extent that they never manage to get off the block with the conventional or institutional lenders. They have to go for the other lenders who charge higher rates of interest and also offer unfavorable repayment terms.

This has different implications in the rural areas. It has been observed that the poor peasants who lose their own fields in a way or are unable to pay their dues, become bonded laborers, who have to slug it out in the fields that belong to others and, that too, for minuscule returns. What happens as a result of this is that these peasants undergo tremendous hardships and immense psychological trauma.

The direct offshoot of these problems, at both the rural and urban level, is that these people are not able to offer the best facilities to their wards and immediate dependents. This is especially applicable in case of healthcare and education. Since these people are not well equipped to handle the rigors of life they also have problems in getting jobs for themselves. This only compounds the problem of social exclusion among the jobless workers.

http://www.economywatch.com/unemployment/social-exclusion.html
DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 0
ECONOMIC EXCLUSION AND POVERTY:
INDIAN EXPERIENCE OF REMEDIES AGAINST EXCLUSION
Sukhadeo Thorat
Prepared for Policy Forum
Agricultural and Rural Development
for Reducing Poverty and Hunger in Asia:
In Pursuit of Inclusive and Sustainable Growth
Session C on “Poverty and Hunger in Rural Asia”
Organized by
International Food Policy Research Institute (IFPRI)
and Asian Development Bank (ADB)
ADB Headquarters, Manila, Philippines
August 9–10, 2007 DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 1

(Final)
Economic Exclusion and Poverty:
Indian Experience of Remedies against Exclusion
Sukhadeo Thorat∗
Executive Summary
This paper develops an understanding of caste-based economic exclusion and its consequences
on poverty of excluded groups, and discusses Indian government strategy against exclusion/
discrimination and policy for empowerment. The caste system as an economic organization is
based on the division of persons in social groups (castes) with fixed and unequal economic
rights. Compulsory and unequal assignment of occupations and property rights implies exclusion
of each caste from the occupation of other castes. Low caste untouchables suffer most as they are
excluded from having any property rights except service to other castes. It is this exclusion of the
low castes untouchables that lead to a high degree of economic deprivation and poverty.
Exclusion and discrimination also adversely affects economic growth due to less than optimum
use of Labour and other resources.
Correcting market exclusion/discrimination therefore is an issue of both equity (and poverty
reduction) and economic growth. Theoretical insights also indicate that increasing market
competitiveness and state interventions in form of affirmative action policies are necessary to
correct market failure associated with caste based exclusion /discrimination.
Socio-economic sketch of Schedule castes (SC) show the adverse consequence of past and
present economic exclusion on the SC. This is reflected in high degree of inequality between
them and other section with respect to ownership of capital assets, employment, and wage
earning education and health situation and others indicators of human development. In 2000
about two-third of SC rural households were landless and near landless, compared to one-third
among others. Less than one-third of households have acquired access to capital assets,
compared to 60% among others. About 60% of SC households have to depend on wage Labour,
much higher than the one-fourth for others. Employment rate and wage earnings also tend to be
low. Disparities of similar magnitude are observed in access to educational and health service.
Studies also show evidence on discrimination in various market and non market transactions
including access to social service like education, health and housing and in political
participation. Cumulative impact of these disparities are reflected in high levels of poverty: about
36% among SCs as compared to only 21% among others Poverty was particularly high among
the SC wage Labour households in rural (60%) and urban area (70 %). SC also suffered from
human right violation and atrocities, during the twenty year period between 1980-2000, annually
an average of 23000 cases of human right violation and atrocities were registered by the SC with
the police.

* Director of the Indian Institute of Dalit Studies and Chairman of the University Grant Commission of India. DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 2
The Indian government has, since adoption of constitution in 1950, recognised this problem and
developed specific anti-discriminatory and other policies for economic, educational, social and
political empowerment of the SC. Policies include enactment of ant-untouchability or civil right
Act, Prevention of Atrocities Act and reservation in states services and political bodies.
Economic empowerment includes measures to increase access to private ownership of capital
assets, education and social services like health, housing etc. In order to implement various
schemes the government has developed a elaborate administrative machinery at the centre and in
the states including separate Ministry at the centre and the states government and special bodies
to monitor the programmes. It created a financial mechanism in the form of Special Component
Plan for SC and separate financial institutions to allocate funds on the targeted programme for
poor among the SC. DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 3
Economic Exclusion and Poverty:
Indian Experience of Overcoming Consequences of Exclusion
Sukhadeo Thorat∗
Introduction
In this paper the main purpose is to develop an understanding of caste-based exclusion/
discrimination and its impact on lack of access to sources of income and poverty of excluded
groups. Firstly, drawing from the theoretical interpretation we discuss the governing principles of
the caste system that involve exclusion and discrimination, develop some insights on the concept of
exclusion/discrimination—the way it has evolved in the modern economic literature, and the
consequences of exclusion on poverty and economic growth. Secondly, we discuss the impact of
exclusion and discrimination on economic deprivation of the schedule castes by presenting an
empirical account of their present economic and social conditions including the evidence on
continuing economic and social discrimination and exclusion. Thirdly, we discuss Indian
government policy and strategy against discrimination and exclusion, and for economic and social
empowerment. Finally in the light of these insights we make suggestions for groups facing similar
situation.
Interpreting Caste and its Consequences: Insights from Theories
In its essential form caste as system of the production organization and distribution is governed by
certain customary rules and norms which are unique and distinct. In general the caste based
economy is one in which occupations (or property rights) are hereditary, compulsory and
endogamous. The organizational scheme of the caste system is based on division of people in social
groups (or castes) in which the occupations and property rights of each individual caste are
predetermined by birth and hereditary. The assignment or division of occupations and property
rights across castes is unequal and hierarchal. Some occupations are also considered socially inferior
(or polluting) with low social statue for those engaged in them. And lastly the caste economy is
maintained or enforced through the instruments of social ostracism (system of social and economic
penalties) with justification and support from philosophical elements in Hindu religion (Akerlof
1976, Scoville 1991, Romer 1984, Lal 1988, Ambedkar 1936 and 1987).
The caste system is based on a graded hierarchicy. Various castes are artfully interlined with
each other (in their rights and duties) in a manner that the rights and privileges of higher castes
become the disadvantages of the lower castes, particularly the untouchables. In this sense a caste
in a single number cannot exist but only in plural numbers. Castes exist as a system of
endogenous groups, which are interlinked with each other in unequal measure of rights and
relations in all walks of life. Castes at the top of the order enjoy more rights, at the expense of
those located at the bottom; untouchables at the bottom of caste hierarchy have much less

* Director of the Indian Institute of Dalit Studies and Chairman of the University Grant Commission of India. DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 4
economic and social rights. This is also due to a particular concept (or perspective) of “human
hood” involve in caste system, under which the untouchables are considered as “inferior human
being” and therefore not entitle to any individual social, religious, political and economic rights,
while the high caste are considered as “superior human being” and entitled to more rights and
privileges (Ambedkar first published in 1987).
Concept of Caste Based: Exclusion and Discrimination
Since the occupation and property rights of each caste are fixed and compulsory it necessarily
involves forced exclusion of one caste from the occupations of other castes. Determination of
occupation by birth obviously restrict the freedom of occupation but does not necessarily lead to
deprivation and poverty, provided it there are reasonable sources of livelihood for each caste. In
the case of untouchables however exclusion lead to deprivations in so far as they are excluded
from access to all sources of livelihood, except the manual labour and service to castes above
them. Their exclusion is multiple, comprehensive and complete.
The concept of “exclusion and economic discrimination” in modern economic literature has been
developed with respect to race, ethnicity and gender. At a general level social exclusion is
considered as a “process through which individuals or groups are wholly or partially excluded
from full participation in the society within which they live—in this sense social exclusion is
opposite to social integration” (de Haan 1999). Sen (2000) also draw distinction between the
situation where some people are being kept out (at least left out) and where some people are
being included—may even be forced to be included—in deeply unfavorable terms and described
two situation as (unfavorable) exclusion and unfavorable inclusion. The “unfavorable inclusion”
particularly those with unequal treatment or unacceptable arrangement may carry the same
adverse effects as the unfavorable exclusion does. This concept is quite close to concept of
“economic discrimination” developed separately in recent economic literature related to race and
gender, which recognized participation or access but with unequal treatment in the labour and
other markets.
Discrimination in labour markets, for instance refers to a situation of unequal treatment of the
workers possessing same productivity in hiring or in wage payment due to non economic group
characteristics, such as race, colour or gender or caste. The real relevance of an exclusionary
perspective is, thus conditional on the nature of the process of deprivation.
Some researchers on caste have applied the concept of labour market and occupation
discrimination to caste (Banerjee and Knight 1991). While applying the concept developed in
context of race and gender to the caste, it is necessary to recognise the uniqueness of caste
discrimination. The normative framework of the caste system involves exclusion and
discrimination in multiple market and non-market transactions and social relations. Untouchables
also suffer from social exclusion due to the practice of untouchability, which brings an additional
dimension to their discrimination and exclusion. Thus, exclusion and discrimination may involve
(Thorat 2002):   DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 5
(1) Denial of some groups in hiring for jobs or in sale and purchase of factors of production,
(like agriculture land, non-land capital assets and various factors inputs), consumers
goods, social service like education, housing and health including common property
resources (such as water bodies and land) etc.
(2) Differences between price charged or received and the market prices. This can include
price of factor inputs, and consumers goods, price of factors of productions such as
wages for labour, price of land or rent on land, interest on capital, rent on residential
houses, charges or fees on services such as water and electricity.
(3) The former untouchables may also face exclusion and discrimination from participation
in certain categories of jobs (the sweeper being excluded from inside household job such
as cooking or others) and sale of certain consumer goods (such as vegetable or milk and
similar items) because their occupation and physical touch is considered to be polluting.
(4) The former untouchables may also face discrimination and exclusion in use of public
services like road, temples, water bodies and other public services.
(5) Due to the physical (or residential) segregation and social exclusion due to notion of
untouchability (or touch-me-not-isum), they suffers from a general exclusion what Sen
would described as “constitutive relevance” of exclusion, in which exclusion or
deprivation is intrinsic importance in its own—for instance not bring able to relate to
others and to take part in the life of the community can directly impoverish a persons’
life, in addition to the further deprivation it may generate.2
Consequences of Discrimination and Exclusion
Economists maintain that efficient functioning of markets is of central importance in the
development process, and can have a profound impact on economic growth and the distribution
of income. Since in a private economy markets are the place where people get access to factors
of productions, employment, consumers goods and service, the exclusion and discrimination of
some groups in the markets transactions on the basic group characteristic is a serious case of
market failure. Market discrimination adversely affect both economic efficiency and income
distribution. Discrimination thus is an issue not only of equity but also economic growth
(Birdsall and Sabot 1991).
The consequences of caste system however are pronounced in income distribution and poverty of
the excluded groups. Since the property rights are assigned unequally across the castes the
income distribution is generally skewed on caste line. The impact on the SC is far more serious
as they are excluded from an access to property rights including education.
Restriction on mobility of labour also leads to unemployment among the SC. By not permitting
readjustment of employment, caste becomes a direct cause of much of involuntary
unemployment among the low castes (Ambedkar 1987, Akerlof 1980).
Labour market discrimination slows down economic growth due to less than optimal allocation
of labour among firms and economy, by reducing job commitment and efforts of workers who
perceive themselves to be victims of discrimination and by reducing the magnitude of investment DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 6
in human capital by discriminated groups and return on this investment (Birdsall and Sabot
1991).
Further the occupations of some castes are considered polluting and socially degrading. Forced
into these occupations on account of their caste origin, people do not derive job satisfaction. In
fact such occupations constantly provoke them to aversion, ill will and desire to evade which
also affect their efficiency.
Finally exacerbating current inequality between groups, and by contributing to its perpetuation
across generations discrimination and exclusion may foster conflict. Caste based discrimination
in access to sources income and human development as well as discrimination in civil and
political of subordinate groups thus has potential for conflict.
Remedies against Discrimination and Exclusion
Reducing economic discrimination is thus a worthwhile strategy as it is likely to increase economic
growth, reduce inequality and poverty among groups and also minimise the potential for conflict.
One strand in economic theory argues that in highly competitive markets, discrimination will prove
to be a transitory phenomenon as there are costs associated with discrimination to the
firm/employer, which results in lowering the profits. However, others observed that for several
reasons market discrimination might persist over long periods, because not all markets are highly
competitive and monopoly power is quite significant feature of both in developed and developing
economies. Even in competitive markets discrimination may persist if all firms practice
discrimination. Therefore, correcting discrimination requires both improvement in market
competitiveness and direct measures to overcome market failure. It calls for state interventions in
various markets and non-market transactions to provide protection against exclusion and
discrimination. It also demand strategies to improve the ownership of fixed capital assets including
human capital which is remarkably deficient due to exclusion and discrimination in the past.
Therefore various measures including compensation or reparation for exclusion in the past figured
prominently in discussion on remedies.
Economic Situation of Schedule Castes
Thus, the caste economy involves exclusion of low caste untouchables (or scheduled castes) in
multiple spheres, and high levels of economic deprivation and poverty. Based on official data,
we present a brief sketch of the socio-economic condition of the SCs: with respect to occupation,
ownership of agricultural land and non-land capital assets access, education and health,
employment and poverty.
The Schedule Caste constitutes about 17 percent (equivalent to 138.2 million) of India’s
population in 1991, (estimate for 20001 put this figures at 18%) 81% live in rural areas, spread
all over the country.
Occupation Pattern
Data on occupation patterns capture the access of SC households to sources of income. The NSS
provide data on economic activities or occupations in terms of proportion of self-employed and DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 7
wage labour households. While the former is a measure of access to capital assets like
agricultural land and non-land capital assets (from which historically SCs have been debarred),
the latter indicate continuing dependence on the traditional occupation of wage labour (Table 1).
In 2000 of the total SC household in rural area, about 17% pursued cultivation as an independent
(self-employed) occupation. About 12% was employed in some kind of non-farm selfemployment activities (or business). In rural areas thus, about 28% of SC households had
acquired some access to fixed capital assets, (agricultural land and non land asset). This was still
a very low proportion compared with 56% for other households (non sc/st households). In urban
area also as compared to other households (35.5%) the access to capital assets to SC was low
(27%) (Table 1).
Inadequate access to fixed capital assets, lead to exceptionally high dependence of the SC
household on manual wage labour. In 2000 the wage labour household account for 61.40 % of
all SC households in rural area and 26% in urban area, compared to 25.50% and 7.45% for other
households. In urban areas 38% of SC households also depend on regular wage and salaried jobs
(Table 3). Thus about 62% of the SC household in rural and 63% in urban area continue to
depend on wage employment and only about 28% had acquired some access to fixed capital
assets. As we shall see latter although close to one-third has acquired access to fixed capital
assets, most of them are small and marginal farmers and petty business holders.
Information on the ownership of agricultural land by the SC in rural area provides some insights
for low proportion of self-employed cultivators among the SC household in rural area. In 1991
about 13% of SC households were landless and 87% own some land. Among the latter (that is
land owning household), about 56% owned less than one acre (of which 47.50% own less than
half acre). Thus the landless and near landless (that is those owning less than one acre) account
nearly 70% of the total SC household in 1991. Evidence for more recent year, 1999-2000 from
alternative source namely NSS Employment survey put the figures of landless and near land less
ness among the SC in vicinity of 75 percent (Table 2).

Employment/Unemployment
Since more than 60 percent of the SC workers in rural and urban areas depend on wage
employment, their earnings are determined by level of employment and wage earning, daily or
regular. The SC worker seems to suffer from possible discrimination both in employment and
wage earning in the labour market. The NSS data on employment for 2000 indicate that the SC
worker suffered from low employment. The differences in the employment rate based on usual
principal status (which capture open employment/unemployment) between the SC and others are
not large. However differences emerge clearly for employment rate based on current daily status
(CDS) which capture the underemployment of the employed workers. In 2000 the CDS
employment rate in rural area was 46% for SC male workers, compared with 48.40% for other
male worker. Similarly the CDS employment rate for SC workers in urban area was 45.8%,
compared to 49.9% for other households (Table 4). Disparities between the SC and Others are
reflected in the unemployment rate. Unemployment rates based on CDS for SC was about 5.0%
as compared to about 3.5% for other worker in rural and urban area (Tables 5 & 6).   DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 8
The NSS data on the wage earning revealed disparities between SC wage labour and other
labour. For instance in 1999-2000 the average weekly wage earning of an SC worker (at 1993-94
prices) was Rs.174.50 compared to Rs.197.05 for other workers (estimate by Dubey 2003, DFID
study).
Poverty
With high incidence of wage labour associated with high rate of under-employment and low
wage earning, the SCs household suffer from low income, and high incidences of poverty. This
is reflected in the proportion of persons falling below a critical minimum level of consumption
expenditure, what is called the poverty line. In 1999-2000 about 35.43% of SC person were
below the poverty line in rural areas as compared to 21% among others; in urban areas the gap
was slightly larger 39% of SC and only 15% among others (Table 7).
The variation in poverty ratio across household types or occupational groups is striking. In 1993-
94 the incidence of poverty was about 60 per cent among agricultural labour followed by 41.44
per cent among non-agricultural labour. The level was relatively low for persons engaged in selfemployed activities in agriculture (37.71 per cent) and in the non-agricultural sector (38.19 per
cent). Poor SC household were over-represented in these groups. In urban area the incidence was
astonishingly high among the casual labour (69.48 per cent). The poverty was also high among
the self-employed households (54%). High incidence of poverty among those SC households
engaged in self-employment in agriculture and in non-agriculture indicates that they are normally
concentrated in small farm and low income petty businesses (Table 8). The recent data on
monthly per capita expenditure (MPCE) for more recent year, 1999-2000 also bring out
disparities between the two groups; practically for all household types the MPCE for the SC was
lower than the other households (Table 9).
Access to Education and Health
In addition to property rights SCs have been denied right to education. There are large gaps in
literacy rate and level of education between them and others. High drop out in school, poor
quality of education, discrimination in education, are some of the educational problems faced by
SC. In 1991 (latest census year for which data are available) literacy rate among SCs was 37%
compared to 58% among the non Sc/St. The literacy rate was particularly low among the female
(23%), two time less compared with other women. School attendance is about 10% point less
among SC boys than other boys, while the difference is about 5% among the girls. Number of
studies also observed discrimination in the school in various forms (Nambissan and Sedwal)
(Table 10).
Evidence based on National Family Health Survey data for 1998-99 revealed wide gap between
SC and others in health status and access to health services (Tables 11, 12 & 13). Early marriage
and high fertility characterized the SC population. The difference in the total fertility rate
between them and others is by more than a year. The percentages of SC women using any
method and their exposure to family planning messages or media is comparatively low. Infant
(83%) and child mortality (39%) among the SC is higher than others, 61% and 22% respectively. DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 9
In 1998-99 at least 56% of SC women suffered from the anaemia. More than 70% women’s
delivery took place at home and only one-fifth took place in institution and more than 40% of these
are delivered by TBA (Village Dias).
The incidence of morbidity among the children is high, more than three-fourth of SC children are
anaemic, one-fifth to one-third suffered from fever, and another one-fourth by ARI and diarrhoea.
The extent of malnutrition and under nutrition among the SC children is high, as more than half of
them suffered from this problem. High morbidity and child mortality among SCs is closely linked
with poverty and low educational status, and with discrimination in access to health services. High
incidence of illiteracy, poverty discrimination reduce the capacity of SC to demand and utilize the
public health services.
Economic Discrimination
Preceding sections show the disparities in ownership of capital assets, employment, education
and access to health services between the SC and other households. Although there has been
some improvement in the ownership of capital assets still a large proportion of SC households
continue to depend on the traditional occupation of wage labour. To what extent are the
disparities and segregation into traditional occupations the legacy of the past exclusion, and to
what extent is it conditioned by continuing discrimination and exclusion in the market and non
market transactions or both is an important question? The issue of economic discrimination,
particularly the market exclusion and discrimination has been almost neglected in the Indian
social science research.
Very few studies have empirically examined the nature and magnitude of economic
discrimination. Limited evidence points towards the presence of discrimination against the
Scheduled Caste in labour and other factor markets. Studies observed that high landlessness
could be due to weak resource position but also due to the discriminatory working of the land
market which reduce the access of SC to purchase and leasing of agricultural land (Nanchariah,
1988). Studies also provide evidence that discriminatory working of the labour market may
explain low employment rate and wage earning of the SC workers Banergee and Knight (1991)
observed that: “there is indeed discrimination by caste, particularly job discrimination” and that
“discrimination appears to operate at least in part through traditional mechanism, with
untouchables disproportionately represented in poorly-paid dead-end jobs.” Even if
discrimination is no longer practised, the effects of past discrimination could carry over to the
present. This may help to explain why discrimination is greatest in operative jobs, in which
contracts are more important for recruitment, and not in white-collar jobs in which recruitment
involves formal methods. The economic function which the system performs for favoured castes
suggests that taste for discrimination is based, consciously, or unconsciously, on economic
interest, so making prejudice more difficult to eradicate".
Beside land and labour markets some studies also found discrimination in occupation, credit and
other market transactions. An Andhra Pradesh study (Venketeswarlu, 1990) observed social
ostracism being used against SC in changes of occupation. In Karnataka, Khan (1995) revealed DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 10
that nearly 85 per cent of the respondents continued with their traditional occupation and only 15
per cent could make a switch over. In the urban areas, however, 56 per cent had experienced a
shift away from traditional occupation. An Orissa study (Tripathy 1994) observed discrimination
in land lease, credit and labour markets in rural areas. Nearly 96 per cent of untouchable
respondents in one village and all untouchable respondents in the second village were
discriminated against in wage payment; 28 per cent in one village and 20 per cent in the other
faced discrimination in the share of rent; and discrimination in interest rate charged by
moneylenders was found in both villages. A Coimbatore study (Harriss Kannan and Rodger
1990) observed that caste contact played a major role in sources of information and means of
access to first jobs.
How has caste changed?
How dynamic is the caste system? And what determines the continuity and change in caste
economy? Theoretical literature by the economists underlined three elements involved in the
dynamics of caste system. The changes in caste system will be influenced by the magnitude of
social costs (in terms of social isolation/standing), economic cost (in terms of transaction and
enforcement costs of enforcing the system), economic gains (in term of profit and surplus
appropriation to enforcer of the system) and to what extent the modern ideas about human rights
and equality support or contradict the one involved in the caste system. If changes in the caste
system involve low social and economic costs and high economic gains and also if a recognition
and pursuit of modern concept of human rights based on equality and justice is predominant then
impulses and condition for change would be much stronger. Conversely traditional rules would
persist or change partially if the alternative rules involve high social and economic cost, yield
less economic gains to the higher caste and that recognition and pursuits of modern idea about
human rights based on justice and equality are weak.
The caste economy has undergone changes but at the same time there is continuity in some of its
traditional aspects. Empirical evidence revealed that about one-third of SC household in rural
and urban area have acquired access to land and non land capital assets, from which they were
prohibited. In urban area about 38% were also employed in regular/salaried job. The literacy rate
has improved three fold, from 10% in1961 to 37% in 1991. This little gains needs to be seen in
the background of traditional restrictions for SCs in the ownership of capital assets and
education. The cumulative impact of this and other improvements is reflected in decline in
poverty, from 59% in 1983-84 to 35% in 1999-2000 in rural area areas.
Notwithstanding these gains, the disparities between them and other section of Indian society
still continue as they lag behind with respect to number of development indicators. The access of
SC to fixed capital assets is still very low and as result, large majority depend for employment on
their traditional occupation, namely the wage labour. The employment rate and wage earnings
are however low compared with other sections as they face discrimination in the labour market.
Disparities of similar magnitude are observed in the case of education and access to health
service. Cumulative impact of these deprivation was such that although level of poverty among
them had declined the gap between them and other section (that is non sc/st) still continue. In
order to reduce the disparities in poverty between SC and others the poverty among the SC DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 11
should necessarily decline at a faster rate than other. During 1983/2000 the poverty among the
SC had declined at lower per annum rate (-2.50%) compared to the others (-3.02%) (preliminary
calculation by Dubey and de Hann DFID, 2003).
Government Strategy
Government approach towards the SC draws primarily from the provisions in constitution. This
guarantees equality before the law (artilce14) (over turning the customary rules of the caste
system), makes provisions to promote the educational and economic interest of the SC and to
protect them from social injustice and all forms of exploitations (articles 46), provides for special
measures through reservation in government services, and seats in democratic political
institutions (articles 330 and 335). It legally abolished the practice of untouchability and
discrimination arising out of untouchability (article 17). Finally it provides for an establishment
of a permanent Body to investigate and monitor social and economic progress of the Schedule
castes on annual basis.
Generally the approach and strategy of the government towards the SC has been influenced by two
main considerations, namely (a) to overcome the multiple deprivations of the SC inherited from
exclusion in the past, and to the extent possible bring them on par with others and (b) to provide
protection against continuing exclusion and discrimination in the present, by encouraging their
effective participation in general social, economic, and political process in the country. Towards
that end the government has used two fold strategy, namely (a) Anti-discriminatory or protective
measures and (b) developmental and empowering measures.
Anti-discriminatory measures include enactment of Ant-untouchability act of 1955 (renamed
as protection of Civil rights Act) and Schedule Caste/Tribe (Prevention of Atrocities) Act 1989
under which practice of untouchability and discrimination in public places and services is treated
as offence. The second Act provide legal protection to the SC against violence and atrocities by
the high castes.
Reservation (Affirmative Action policy) in governments services, state run and supported
educational institutions and in various political democratic bodies also falls under antdiscriminatory and protective measures. These “Positive Discrimination” measures have been
used by the government to ensure proportional participation of the SC in various public spheres,
which otherwise may not have been possible due to practice of exclusion and discrimination.
Strategy of Economic Empowerment:
The affirmative actions policy is confined to state run and state supported sectors and the private
sector where more than 90% of the SC workers are engaged indeed are excluded and therefore
remained unprotected from possible discrimination. In the absence of (legal) provision for
affirmative action policy in the private sectors the state has used “general programmes” for
economic, educational and social empowerment of the SC. The focus has been to improve the
private ownership of fixed capital assets, human resource capabilities, and access of SC to social
and basic services like housing, health, drinking water, electricity and others. The strategy for
improving or building the private ownership of capital assets and human resources capabilities DRAFT
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has been primarily undertaken as a part of anti-poverty and other economic and social
programmes for the poor, by targeting or fixing specific quotas for SC households in the case of
divisible schemes. About one-third of the total funds of the central government are allocated to
economic empowerment, about half to education and the remaining one-fifth to social services
like housing. Measures for Economic empowerment include
• to improve ownership of capital assets, enhance the business capabilities and skills of SC
persons to enable them to under take self-employed business activities and finally to provide
wage employment for labour household.
• surplus land from the ceiling and government land is distributed to the landless household
with supplementary schemes of supply of credit and inputs at subsided rates to the SC
households in rural area.
• the schemes to provide financial capital, training and information to undertakes new business or
improve existing business are developed. Integrated Rural Development Programme (IRDP) is
the earliest self-employment programme to enable identified rural poor families to augment
their income through acquisition of credit based productive assets.
• wage employment, focused on wage labour household to ensure minimum employment
particularly during the lean season
• Schedule castes constitutes about 61 percent of bonded labour in the country. Separate
programme to release and rehabilitate the bounded labour are designed by the government.
• There are also special Schemes for some occupational groups such as Sweeper, Mining worker,
Bedi worker for education, health, and housing.
Educational development constitute the major programme of the government (about half of the
central government spending on the SC). The main educational problem of SC relates to low
literacy rate, high drop out at school and higher level, low quality education and discrimination
and exclusion including the admission in educational institution. Government educational
schemes therefore include measures (a) to improve educational infrastructure particularly in area
populated predominantly by SC, (b) admission in educational institutions through reservation of
seats and other measures, (c) financial supports at various level of education, including
scholarships/fellowship national and international, (d) remedial coaching to improve quality of
education and capabilities, (d) special hostel for boys and girls and (e) in all these schemes special
focus on girls education.
Government have also developed the schemes to improve the access of SC to civic amenities like
drinking water, housing, sanitation, electricity, road and public distribution of food. Since the
settlement of the SCs in rural area are mostly segregated often the civic amenities failed to reach
to their localities. A special assistance is given to the state (under the special central assistance to
special component plan for SC) to ensure the supply of these amenities.
Problems faced by SC women occupy a special place in the government programmes. While the
Dalit women share common problems of gender discrimination with their high caste counterpart,
they also suffer from problems specific to them. These relate to extremely low literacy and
education level, heavy dependence on wage labour, discrimination in employment and wages,
heavy concentration in unskilled low paid and some time hazardous manual job, violence and
sexual exploitation, particularly the victim of religious and social superstitions (devadasi and DRAFT
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Sukhadeo Thorat
Page 13
similar institutions of religious prostitution). Therefore in each of the programmes of economic
empowerment, educational development and gender related issues special focus is given to the
SC women. Specific legislations have been enacted and the schemes developed to overcome the
specific problems of SC women.
Administrative Set up
An elaborate Administrative Machinery has been developed in the Centre and the State/Union
Territories for Scheduled Castes. The nodal ministry at the centre is the “Ministry of Social
Justice and Empowerment” which support and supplement financially efforts of others Union
Ministries, states governments/Union Territories and NGOs. The Ministry is entrusted with the
work of policy framing, monitoring and evaluation of central government programmes, which
are mainly implemented through the individual states. The ministry works closely with Planning
Commission, in Ministry of Planning in formulation of Special Component Plan for SC and
evaluation of programmes through “Programme Evaluation Organisation” in the Planning
Commission. In the centre most of the ministries have a division or sections, which looks after
specific schemes of the Scheduled Caste. The Ministry also has Research and Training
programme which undertake research and evaluation, which focuses on evaluation and studying
the efficacy of the on going programmes to improve their implementation.
The other important independent administrative institutions which oversea, monitor and make
suggestion for effective implementation of laws and schemes are the National Commission for
SC and ST, Commission for Safai Karmacharis and Standing Committee of the Parliamentarian
on SC and ST. The National commission for SC/ST is statuary body which overseas the
development of the SC, prepare annual report about the progress of the SC which are discuss in
the Parliament every year from its inception in 1950.
A similar administrative set-up also exists at the state level although there is a considerable
variation across the state. Generally most of the states have a separate ministry for Scheduled
Caste, whose function is to formulate policies, implement, monitoring and evaluate the
programmes. The programmes are generally implemented through the special department—at
the state, division, and district and in many cases Taluk level. Many states have Commissions for
Scheduled Caste and Scheduled Tribe like at the centre.
Financial Mechanism
Over a period of time the central and the states government have developed a specific
mechanism for allocation of funds for schemes of the SC. Till the end of fourth Plan (1979-80)
the only funds available for the development of SC were under the general head of “Backward
class sectors.” In the Sixth plan onward new mechanism of allocation from general sectors for
development of SC was developed. The present machanism or strategy of financial allocation is
operationalised through three channels.
Special Component plan: The Special Component Plan is designed to canalise the flow of funds
(and hence the benefits) from the general sectors in the plans of States and Central Ministries for
development of Scheduled Castes both in physical and financial terms. The Special Component DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 14
Plan aims at identification of schemes in the general sectors of development which would be of
benefit to Scheduled Castes, quantification of funds from all divisible programmes under each
sector (generally in proportion of the share in population or poor) and determination of specific
targets in terms of number of families which are to be benefited from those programmes under
each sector. The practice followed so far is to finalise sectoral outlays at the time of finalisation
of the annual plan of a particular State, share under Special Component Plan from each sector is
determined there after. The Special Central Assistance to SCP is to supplement the states efforts
for additional thrust for speedy development of the SC by providing additional support to the SC
families to enhance their productivity and income to bring about occupational diversification.
Specialised Financial Agencies: The main function of the Scheduled Caste Development
Corporations in the states is to mobilise the institutional credit for economic development
schemes of Scheduled Castes entrepreneurs by functioning as catalysts, promoters and
guarantors. These Corporations were to help in two ways: first, in encouraging the financial
institutions, particularly, the commercial banks, to give out on a sufficiently large scale to assist
the Scheduled Castes and secondly, by making schemes more viable for Scheduled Caste
entrepreneurs. Under the priority sectors guidelines Nationalised banks are also required to
provide at least 10% of their total advances to the weaker sections which include SC/ST
borrower by the Public sector banks. The guidelines give high priority to SC/ST in bank
advance.
Political Representation
The provision of reservation for SC in Parliament and state assemblies in proportion to their
population is the principle method which ensure representation and participation in the political
decision making process. At present there are about 82 members of parliament. By virtue of this
representation, the SC M.P. are also represented on various bodies of the government. The
Parliamentary Committee on SC/ST is one such important committee. The political participation
in the state power along with the identical share in bureaucracy through reservation in
government jobs has provided decisive position to the SC in the decision-making and
governance to use it to their advantage.
Despite their share and participation in the parliament and state legislation, it is perceived that
they have not been able to participate and make effective contribution in the decision making,
monitoring the implementation of the programmes, particularly those concerning the poor. Due
to the paucity of the studies on role of the SC political representative, it is difficult to understand
the reasons for their lack of effective role. Isolated research (Narayana, G 1980) on this theme,
however indicate that this relates to lack of single political organisation in the centre and in state
governments, division in to too many fragmented groups, lack of united forum centring around
the common issues concerning SC, inability to understand the complicated issue and policy and
planning machanism and absence of institutional support to enhance the knowledge base and
capacity of the representatives to enable them to effectively participate in political decision
making. DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 15
Outside the political arena, there are number of civil society initiatives, in terms of social
organisation, mobilisation and NGO network. The NGO movement among the SC has a regional
character, with a history of thirty–forty years in the south, but weak and of recent origin in the
north and east. Western India is ahead of north and the eastern India in many respect. Recently,
however there have been attempts to develop the network of dalit NGO in to a national
federation in the form of National Campaign on Dalit Human Rights. This network is a
federation of dalit NGO that are active at the grass root level. Dalit NGOs particularly in south
and west India are fairly active at grass root level and focus on economic empowerment (land,
employment, wages, credit, accessing government programmes, education), political
empowerment ,and gender and human right issues, particularly concerning untouchability and
atrocities (Bernward Causemann and Thorat, Sukhadeo, 2001). Some of these NGOs receive
selective support from government. However many of this civil society initiatives by SC are
faced with problems. While the grass root level knowledge and sensitivity is their strength they,
however lacks in terms of information, working methods, resources and general capacity to link
with the larger outside world of resource and opportunities.
References:
1. Akerlof, George (1976) “The Economic of Caste and of Rat Race and Other Woeful
Tales,” Quarterly Journal of Economic, XC.4. Nov. 1976.
______Akerlof, George (1980) “The Theory of Social Customs, of which
Unemployment may be one consequences,” Quarterly Journal of Economics XCIV-4,
June 1980.
2. Ambedkar B.R. (first Published 1987), “Philosophy of Hindism” Vasant Moon (Edit)
“Dr. Babasaheb Ambedkar Writings and Speeches” Vol.3 Page 1-94.
________Ambedkar B.R. (first published 1987), “The Hindu Social Order - Its
Essential Features” in Vasant Moon (Edit), “Dr. Babasaheb Ambedkar Writing and
Speeches,” Vol.3, Page 95-115, Deptt. of Education, Govt. of Maharashtra, Bombay,
Deptt. of Education, Govt. of Maharashtra.
3. Banerjee, Biswjit and Knight J.B. (1985) “Caste Discrimination in Indian Urban Labour
Market” Journal of Developing Economics
4. David Romer (1984) “The Theory of Social Custom: A Modification and some
Extension” in Quarterly Journal of Economics.
5. Deshi, A.K. and Singh H. (1995) “Education, Labour Market Distortions and Relative
Earning of Different Religious—Caste Categories in India,” Canadian Journal of
Development of Studies, December 21.
6. DFID (2003) “Caste in South Asia and Economic Exclusion-Briefing for Secretary of
state,” DFID Delhi. DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 16
7. Dubey Ameresh (2003) Note and Statistical tables on Social groups prepared for DFID,
Delhi.
8. Haan, De. Arjan (2003) “Extreme Deprivation in Remote Areas in India: Social
Exclusion as Explanatory concept,” Manchester conference on Chronic Poverty,
April2003, session “Social Exclusion, Rights and Chronic Poverty.”
______ (1997) “Poverty and Social Exclusion: A Comparison of Debates on
Deprivation.” Working Paper No. 2, Poverty Research Unit at Sussex. Brighton:
University of Sussex.
9. Lal Deepak (1984) “Hindu Equalibrium,” Cultural Stability and Economic Stagnation,
Vol. I Carendor, 1988 Oxford.
10. Nancy Birdsall and Richard Sabot (1991) “Unfair Advantage — Labour Market
Discrimination in Developing Countries,” World Bank Studies.
11. Randive, B.T. “Caste, Class, and Property Relations,” EPW, Annual No. Feb. 1997
12. Shah, Amita & Sah, D.C, “Poverty Among Tribals in South West Madhya Pradesh: Has
Anything Changed over Time.”
13. Sen, Amartya (2000) “Social Exclusion: Concept, Application, and Scrutiny.”
14. Scoville, James G.L. (1991) “Towards a Model of Caste Economy,” in James G.
Scoville, (Editor) “Status Influences in Third World Labour Markets, Caste, Gender and
Custom” Berlin and New York.
_____ Scoville, James G.L. (1996) “Labour Market Under Pinnings of a Caste
Economy-Failing the Caste Theoream,” American Journal of Economics and Sociology
Vol.55, No.4, Oct. 1996.
13. Thorat S.K. (1996) “Ambedkar on Economics of Hindu Social Order : Understanding
Its Orthodoxy and Legacy,” in Walter Fernandes “The Emerging Dalit Identity” Indian
Social Institue, Delhi.
______ (1999), “Caste and Labour Market Discrimination” (with R.S. Deshpande)
Indian Journal of Labour Economic, Conference Issue, November.
______ (2002) “Oppressions and Denial: Dalit discrimination in the 1990s,” EPW,
February 9. DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 17
______ (1999) “Poverty; Caste and Child Labour: Plight of Scheduled caste and Tribal
childrens,” in “Against Child Labour in India” Edited Klues Voll, F.E.S Foundation,
Delhi.
______ (1999) “Social Security in Unorganized Sector, How Secure are the Scheduled
Caste?” Special Issue, Indian Journal of Labour Economic, September.
_______ (1999) “Rural Wage Labour — Magnitute; Employment and Wage Rate: A
comparative Analysis of Scheduled Caste, Scheduled Tribe and Others in India.”
Ambedkar Centre for Economics Studies; University of Madras, Chennai.
_______ (2002) “Caste and Economic Discrimination, Reflections on Therory, Concept
and Consequences,” 2002 conference paper, Goa University, Panaji.
_______ (2003) “Will Strategy of Disincentive and Targeting Help to control
Population—Limitation of 2001 Population Policy.” Ambedkar Journal of Social
Sciences, January 2003.
_______ (2001) with Bernward Casusemann, “Dalit NGOs—Approaches to Dalit
Empowerment,” A study for EED, July’2001 (Boon, Germany).
_______ Annual Report of National Commission for Scheduled Castes and Scheduled
Tribes, 1999-2000 & 2000-2001.
_______ Government Of India, Ministry of Social Justice and Empowerment, New
Delhi, Annual Report, 1997-98.
______ Government of India Ministry of Welfare, New Delhi, Report of the working
Groups on Development and Welfare of Scheduled Castes During Eighth Fiver-Year
plan, 1990-95.
______ Planning Commission Delhi, Tenth Five Year Plan, Chapter 4.1, Socially
Disadvantage Group, 2003.
14. Thurow, Lester C. (1969) “Poverty and Discrimination,” The Brookings Institution,
Washington, D.C.
15. William Darity Jr. (Edit) “Economics and Discrimination” Vol. I, An Elgar Reference
Collection (U.S.).
______William Darity, Jr. & Steven Shulman (1989), “Question of Discrimination —
Racial inequality in the U.S. labour market,” Wesleyan University Press, Middletown,
Connecticut.
16. Thorat ,Vimal (2002) “The Least of the Oppressed — Dalit Women,” Combat Law, October
& November 2002 DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 18
Table 1
Occupational Pattern: Scheduled Caste and Other (in Percentage)
Occupational Category 1987-88 1993-94 1999-00
SC OTHER SC OTHER SC OTHER
Rural
Self-employed in Agriculture 18.90 43.3 19.12 42.42 16.4 41.1
Self employed in Non-Agriculture 11.0 13.8 10.32 13.89 12.0 14.8
Self-employed (Total) 29.8 57.1 29.49 56.31 28.4 55.9
Agricultural Wage Labour 51.7 23.2 50.6 22.37 51.4 19.0
Non-Agricultural Wage Labour 11.4 09.7 10.22 6.67 10.0 6.3
Rural Wage Labour Total 63.1 31.1 60.28 29.14 61.4 25.3
Others 06.9 11.5 9.67 14.62 10.2 18.7
Urban
Self-employed 28.0 35.2 24.08 35.05 27.3 35.5
Regular Wage/Salaries 39.4 45.0 39.27 43.11 37.6 46.5
Casual Labour 26.0 10.3 26.96 10.57 26.5 7.4
Others Wage 08.5 09.2 9.67 11.25 8.5 10.5
Source: NSS Employment/Unemployment Survey, 1987-88, and 1993-94 CSO, Delhi.
SC= SCHEDULED CASTE; OTHERS = NON SC/ST. (excluding, Scheduled Caste and Scheduled Tribe DRAFT
Economic Exclusion and Poverty
Sukhadeo Thorat
Page 19
Table-2
Percentage of Landless and Near Landless Household Among Scheduled Castes
(% to total Rural households) All India
1982 1992 1999
Land
Less
Less
than
Half
Acre
Between
half and
One
Acre
Up to
One
Acre
Land
Less
and
up to
one
Acre
Land
Less
Less
than
Half
Acre
Between
half and
One
Acre
Upto
One
Acre
Land
Less
and
upto
one
Acre
Land
Less
Less
than
Half
Acre
Between
half and
One
Acre
Upto
One
Acre
Land
Less
and
upto
one
Acre
12.62 47.97 9.53 57.50 70.12 13.34 47.50 8.89 56.39 69.73 10.0 65.0 14.7 6.50 2.80
Sources: figures for 1982 and 1992 are based on NSS landholding survey, and 1999- Employment/ Unemployment Survey NSS DRAFT
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Sukhadeo Thorat
Page 20
Table- 4
Employment Rate 1999-2000 – All India

      Schedule Caste             Other
Male   Female   Male   Female
Rural
Usual Principal Status   52.4 25.5 50.9 15.5
Usual Principal and Subsidiary 53.1 32.5 52.0 22.3
Current Weekly 50.5 27.0 50.1 19.1
Current Daily   46.2 21.2 47.6 149.0

Urban
Usual Principal Status   49.8 15.2 51.4 9.0
Usual Principal and Subsidiary 50.3 18.5 51.8 10.8
Current Weekly 48.6 16.7 51.3 10.0
Current Daily   45.8 14.0 49.9 8.9
Source: Employment / Unemployment Survey, 1999-2000 DRAFT
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Sukhadeo Thorat
Page 21
Table-9
Average MPCE of rural households classified by household type, social group (in rupees)
1999-2000
   RURAL
Household Type     Average MPCE (Rs) of households of
  Social Groups
SC OBC others all

Self -employed
in Agriculture   435.46 495.09 557.19 502.28

Agricultureal
Labour   378.31 397.08 419.35 385.98

Other Labour   438.09 496.18 554.31 482.74

Self-employed
in agriculture   442.22 488.02 602.81 519.53

Other
Households   581.87 591.23 733.68 652.05

All
household   418.51 473.65 577.22 485.88


Average MPCE of urban households classified by household type and social groups (in Rupees)
   URBAN
    Average MPCE (Rs) of households of
house hold type    Social Groups
SC OBC Others all


self -employed   542.68 674.97 953.00 812.96
regular wage/salaried 754.69 859.34 1101.05 981.49
casual labour 463.58 608.23 548.65 540.66
other households   649.49 860.69 1207.74 1030.82
all households   608.79 734.82 1004.75 854.70.
Source: NSS, Consumption Expenditure Survey 55
th
Round –1999-2000 DRAFT
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Sukhadeo Thorat
Page 22
Table -11
Infant Mortality – 1998-99 (in percentage)
Scheduled Caste Other Backward
Caste
Indicators   Others
1998-99 1998-99 1998-99
1. Infant Mortality 83.00
(88.0)
76.00
(82)
61.8
(69)
2. Child Mortality 39.5 29.00 22.2
3. Under five Mortality 119 103 82
Source: National Family Health Survey – 1998-99
Figure in the Bracket indicate the Infant Mortality in Rural Area
Table- 12
Morbidity – 1998-99(in percentage)
Scheduled
Caste
Other
Backward
Caste
Indicators Others
1998-99 1998-99 1998-99
1. Prevalence of
(i) ARI (in percentage)
(ii) Fever (in percentage)
(iii) Diarrhea (in percentage)
19.6
29.4
19.8
19.1
28.1
18.3
18.7
30.40
19.10
2. Percentage of Children with Anemia 78.3 72.00 72.7
3. Percentage of children vaccinated
4. Percentage of Public Medical
Services as sources of childhood
vaccination
87.2 83.0 77.3
5. Treatment of Diarrhea from Public
Health Facilities (In Percentage)
64.6 63.8 66.10
6. Weight for age
(i) % below -3SD
(ii) % below – 2SD
21.2
53.5
18.30
47.3
13.80
41.1
Source: NFHS- 1998-1999 DRAFT
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Sukhadeo Thorat
Page 23
Table -13
Women Health – 1998-99 (in percentage)
Scheduled
Caste
Other
Backward
Caste
Indicators Others
1998-99 1998-99 1998-99
1. Percentage of women with
Anemia
56.00 50.7 47.6
2. Percentage of women with
Antenatal checkup
61.80 65.2 72.1
3. Percentage of those received
tetanus vaccination
74.2 76.8 80.0
4. Place of delivery at Home (in
Percentage)
72.1 62.00 59.00
5. Assistance during delivery
(a) From TAB (Dia) (In
Percentage)
(b) From public health service (In
Percentage)
37.7
36.00
34.9
44.9
31.4
48.9
6. Postpartum check-up (within
two month) (In Percentage)
17.0 15.6 18.30
Source: National Family Health Survey – 1998-99
http://conferences.ifpri.org/2020chinaconference/pdf/manilac_Thorat.pdf
Racial and
economic
exclusion
Policy implicationsBACKGROUND AND ACKNOWLEDGEMENTS
This report was made possible by an international seminar on “The Economics of
Racism” organised by the International Council on Human Rights Policy in cooperation with the Office of the United Nations High Commissioner for Human
Rights. Convened in Geneva on January 24-25, 2001, the meeting was held as
preparations were made for the United Nations World Conference against Racism,
Racial Discrimination, Xenophobia and related intolerance (Durban, South Africa,
August 31-September 7, 2001). For the seminar, the International Council gathered
twent y - s i x   re searcher s and adv i ser s   to di scus s   the l inks between racial
discrimination and economic marginalisation, and identify strategies that might
successfully address the problems that result. Several case studies were prepared in
advance, on different parts of the world and societies at different levels of economic
development. This document draws from those reports, from the meeting discussion
and from other sources.
This report was prepared by Robert Archer, Executive Director of the International
Council, and Mohammad-Mahmoud Ould Mohamedou, Research Director at the
International Council and co-ordinator of the project.
Additional writing and editing was done by Morris Lipson, consultant.
Stephanie Farrior, Professor of International Law at Pennsylvania State University,
and former Director of the Legal and International Organisations Programme at
Amnesty International, served as Rapporteur for the meeting. She prepared a
synthesis note on which this report builds.
Seven background papers were prepared as contributions to the seminar and they
have been integrated in parts into this draft report. These provide information on the
economic and political situation and history of the communities studied. The papers
and their authors are:
“Ethnic Discrimination, Economic Inequality and Political Exclusion in Ecuador” by
Diego Iturralde, Chief of the Research Unit of the Inter-American Institute for Human
Rights in San José, Costa Rica.
“The Experience of Aboriginal Peoples in Canada” by Marian Catherine Jacko,
lawyer with the Government of Ontario in Toronto, Canada.
“Racial Justice: The Superficial Morality of Colour-Blindness” by Glenn C. Loury,
Director of the Institute on Race and Social Division at Boston University in Boston,
United States.
“‘Untouchability’: The Economic Exclusion of the Dalits in India” by Martinbhai
Macwan, Director of Navsarjan Trust, Convenor of the National Campaign for Dalit
Human Rights in India, and Smita Narula, Senior Researcher at Human Rights
Watch in New York, United States.“The Experience of the Twa Pygmies of the Great Lakes Region” by Benon
Mugarura and Anicet Ndemeye, respectively President and Vice-President of
the African Indigenous and Minority People’s Organisation in Kigali, Rwanda.
“United States Globalisation as the Newest Expression of Racial Subordination:
International and Transnational Evidence” by john a. powell (sic), Director of
the Institute on Race and Poverty in Minneapolis, Minnesota, United States.
“The Economics of Racism: People of African Descent in Brazil” by Edna Maria
Santos Roland, President of the Board of Directors, Fala Preta, Black Women’s
Organisation in Sao Paulo, Brazil.
In addition to the individuals above, the following people took part in the
international seminar:
Aklog Birara Senior Advisor on Racial Equality, the World Bank,
Washington, D.C.
András Bíró Chair of the Board of the Otherness Foundation, Adviser
to Pakiv, the European Roma Fund Project, Budapest.
Julian Burger Office of the United Nations High Commissioner for
Human Rights, Geneva.
Neva Collings International Projects Officer, Foundation for Aboriginal
and Islander Research Action, Geneva.
Paulin Hountondji Director, African Centre for Advanced Studies, Professor
at the University of Cotonou, Benin.
John Hucker Secretary General, Canadian Human Rights
Commission, Ottawa.
Lynn Walker Huntley Director, Comparative Human Rights Relations Initiative,
Atlanta.
Gloria Nwabuogu Office of the United Nations High Commissioner for
Human Rights, Geneva.
John Packer Director, Office of the Organisation for Security and Cooperation in Europe’s High Commissioner on National
Minorities, The Hague.
Christopher D. Sidoti Commissioner, Human Rights Commission, Australia.
Tseliso Thipanyane Head of the research department, South African Human
Rights Commission.
Ross Young Advocacy Officer, Minority Rights Group International,
London.
The meeting was chaired by Patricia Williams, Professor of Law at Columbia
University in New York, and Robert Archer, Executive Director of the
International Council on Human Rights Policy.The International Council wishes to thank the following individuals for their
comments on an earlier version of the present report: Martin Alexanderson,
Michael Banton, Julian Burger, Geoff Clark, Stephen Ellis, Gérard Fellous,
Felice Gaer, Thomas Hammarberg, Bahey El Din Hassan, Jasmine Huggins,
Ayesha Imam, J.T. Lever, Glenn C. Loury, Naima Major, Gustavo Makanaky,
Benon Mugarura, Rory Mungoven, Yousri Mustapha, Chandra Muzaffar, Smita
Narula, Mi Nguyen, Vincent Saldanha, Pablo Latapi Sarre, Christopher D.
Sidoti, John Southalan, Rodolfo Stavenhagen, Jo Szwarc, Tseliso Thipanyane
and Theo Van Boven.Racial and economic exclusion
Policy implicationsThis project has been financed by the Ministry of Foreign Affairs of the Netherlands
and the Federal Department of Foreign Affairs of Switzerland.
The Council thanks the Ford Foundation (New York), the Swedish Intern a t i o n a l
Development Co-operation Agency (SIDA), the Royal Danish Ministry of Foreign Aff a i r s
(DANIDA) and OXFAM (UK) for their contributions to the work of the Intern a t i o n a l
C o u n c i l .
This re p o rt makes re f e rence to The Persistence and Mutation of Racism, a
companion re p o rt which was published by the International Council in 2000. That
re p o rt is available in English, French and Spanish. If you would like to obtain copies,
please contact our off i c e .
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Policy implicationsC o n t e n t s p a g e
I. INTRODUCTION
D e f i n i t i o n s 4
The re p o rt 5
II. THE PROBLEM
Impediments to equal tre a t m e n t 6
The poverty gap 9
The skills gap 1 0
L a n d 1 1
Lack of statistical inform a t i o n 1 2
III. THE INFLUENCE OF HISTORY
C o n f ronting the past 1 4
The reparations arg u m e n t 1 8
P e rceptions and capacity 1 8
Evidence of pro g re s s 2 0
I V. CONSEQUENCES FOR POLICY
G e n e r a l 2 3
Legal action and enforc e m e n t 2 4
Political re p resentation and re c o g n i t i o n 2 5
Finance and transfers of re s o u rc e s 2 6
P rovision of serv i c e s 2 7
Attitudes and perc e p t i o n s 2 8
Cited works and select bibliography 3 0Racial and economic exclusion 1
I N T R O D U C T I O N
Those who suffer racial discr imination are not always economically
disadvantaged. The experience of Indonesians of Chinese origin, of people
of Indian descent in East Africa, and of many Jewish communities in Euro p e
shows this. Nevertheless, victims of racial discrimination are also very often
p o o r, sometimes profoundly so. Where racial discrimination and economic
disadvantage become established over time, more o v e r, re f o rm is
e x t r a o rdinarily difficult. This re p o rt argues that it re q u i res considerable
commitment and the adoption of a co-ordinated approach that
simultaneously address diff e rent aspects of the discrimination concern e d .
The present work arises out of a short survey of inter national trends in racism
and racial discrimination pre p a red in 2000 by the International Council on
Human Rights Policy.
1
It became apparent that some cases of racial
discrimination are particularly entrenched and difficult to re f o rm. This was
t rue, for example, of discrimination against Dalits in India, Roma in Euro p e
and Haitians in the Dominican Republic. In each case, despite diff e rences in
other respects, poverty or economic marginalisation were strongly associated
with discrimination on grounds of race or descent; and this had been so for
a long time.
Much of that first re p o rt concerned the problem of denial and the limits of
legal action. To what extent could racial discrimination or racial stigma be
removed by legal interventions and remedies? While it was obvious that
legal action is essential, because the absence of good law and inadequate
or abusive policing are responsible for many of the problems identified, it
became evident that legal a c t i o n alone would not reach the heart of the
issue. Legal sanctions could prevent or inhibit certain behaviour but
could not change people’s minds – our denial of prejudice in ourselves, our
accommodation to the biases of others, and our ability to transmit bigotry
a c ross generations. Attitudes and their transmission are at the heart of
r a c i s m ’s persistence and continued power.
A c c o rd i n g l y, the International Council decided that it would consult to see
what c o m b i n a t i o n s of policy might have a positive effect in such cases. This
is the purpose of the present re p o rt .
The re p o rt is not meant to be an exhaustive study of the issues. A larg e
academic literature deals with the questions discussed here2 and we do not
1 I n t e rnational Council on Human Rights Policy, The Persistence and Mutation of Racism,
Versoix, Switzerland: ICHRP, 2000.
2 See the select bibliography at the end of the re p o rt .2 Racial and economic exclusion
list or analyse all the cases that might be relevant. The approach was to
examine a small number of cases, diff e rent in character and in diff e rent part s
of the world, where there is a clear historical association between economic
d i s e m p o w e rment and racial discrimination, and to compare them in order to
identify policy re c o m m e n d a t i o n s .
We should again stress that we are not saying here that racial discrimination
and economic marginalisation always go together. They do not. The claim is
rather that, when racial and economic discrimination are associated for a long
period of time, disadvantage tends to become entrenched over generations
and re f o rm is particularly difficult to achieve. It is these cases we are
considering, not all forms of racial and/or economic discrimination.
Several country papers were pre p a red as background. In each case, the
authors described the nature of economic and racial discrimination in the
c o u n t ry concerned, legal and other attempts that had been made to curb or
sanction it, and evidence of success or failure. The case studies looked at the
experience of African-Americans in the United States, Dalits in India, Tw a
(“pygmies”) in the African Great Lakes Region, Roma in Hungary and other
p a rts of Eastern Europe, indigenous populations in Canada and Ecuador, and
people of African descent in Brazil.
A p a rt from the problem itself, these societies share little in common. Four
exist in geographically large areas (India, the United States, Canada and
Brazil) and three in mid-sized to small ones (Hungary, Ecuador, Great Lakes
region). Some are densely populated (Great Lakes, India) while others are
sparsely inhabited (Canada). The victimised communities also vary in number
– from over 160 million Dalits in India to a few thousand Twa in the Gre a t
Lakes re g i o n .
Some of the societies studied are wealthy (United States, Canada); others are
middle income (Brazil, Ecuador) or poor (India, Great Lakes Region). Some
a re characterised by severe inequalities between rich and poor (Brazil, United
States, India), whereas others have well-developed social policies that aim to
limit such inequalities (Canada). Some have industrialised economies where
the majority (including victimised groups) live in cities (United States). Others
possess large agricultural and industrial sectors and victimised communities
a re to be found both in the countryside and in cities (India, Brazil, Hungary ) .
In the Great Lakes, we are dealing primarily with an agricultural society.
The political environment is no less variegated. Some of the societies studied
a re democracies, while others have recently experienced authoritarian or
m i l i t a ry regimes (Brazil, Great Lakes). The United States runs a classic
capitalist economy, whereas Hungary had a communist government until
quite re c e n t l y. The legal regimes differ as well, though racial discrimination is
forbidden by law in all the countries studied. The sample includes bothRacial and economic exclusion 3
common law and civil law traditions, societies in which litigation is well
developed (United States, Canada, India) and ones in which that is not the
case, as well as societies in which traditional and modern legal systems coe x i s t .
Socially and historically, some of the victimised groups are “first people” or
indigenous communities (Canada, Ecuador), while others are the
descendants of slaves imported two to three hundred years ago (Brazil,
United States), and yet others live in a caste system that is many centuries
old (India). The Roma have a distinct social history in Europe that is half as
ancient as India’s caste system.
Clearly no simple model will accommodate such variety, or take adequate
account of the distinct history and character of these cases – let alone others
that could have been selected for re s e a rch (in the Caribbean, in Europe, in
Australia, in the Arab world or in Japan, for instance). Similarly, it would be
mistaken to suggest that one policy mechanism might be successful acro s s
this range of cases. It is not the purpose of this re p o rt to promote such a
m o d e l .
H o w e v e r, it is essential to recognise that fundamentally similar processes are
at work here. In all the societies studied, racial discrimination re i n f o rc e d
economic marginalisation and vice versa. Members of victimised gro u p s
came to be exploited and marginalised economically and, at the same or at
separate times, they came to be considered inferior.
F rom the perspective of dominant groups, their inferiority “justified” their
exploitation and their consequent impoverishment “demonstrated” their
i n f e r i o r i t y. The two processes confirm one another. With the passing of time,
m o re o v e r, the social, political and economic inequalities that result came to
be entrenched. The assumption that one group was “naturally” poor because
it was inferior became established intergenerationally – and diff e rences of
o p p o rtunity (access to health, education, employment, and so on) became
systemic. In the absence of a countervailing force for re f o rm, the victimised
g roup cannot easily escape its poverty or the stigma that re i n f o rces it, and
time merely deepens the divide between the dominant and dominated gro u p .
To complicate matters furt h e r, often enough some members of the victimised
g roup internalise (and thereby confirm by their behaviour) some of the
assumptions that underpin their treatment by the dominant gro u p .
3
3 This complex and sensitive issue is discussed in International Council, 2000, op. cit.
Members of victimised groups may indeed have a lower attendance or success rate in
schools, or may indeed commit more crime on average, or may have higher rates of family
b reakdown. Interpreting such trends is a delicate matter, however, and not only
i n t e l l e c t u a l l y. Such evidence tends to re i n f o rce stereotypes. It may also illuminate forms of
despair and accommodation among members of victimised gro u p s .4 Racial and economic exclusion
To transform such a situation, policies need to address it from a variety of
angles. Authorities must not only provide legal protection for such groups, but
remedy the historical legacy of poverty by providing re s o u rces – education,
health care, employment – that will eventually enable members of such
g roups to compete with others on reasonably equal terms. This is not
enough: it is also necessary to deal with attitudes and perceptions – both the
p resumptions of “mainstream opinion” and the perceptions of victimised
g roups, who may not otherwise trust any process of re f o rm sufficiently to
make it work. In this, it is crucial to acknowledge that perceptions of history
deeply influence the way in which inequalities (and perceptions of inequality
that enable racial discrimination and stigma to persist) are created and
m a i n t a i n e d .
It is commonplace to observe that solutions to problems are themselves likely
to be complex. Nevertheless, this has consequences for decision-makers
who wish in a serious way to change or transform discrimination and stigma
in their societies.
D e f i n i t i o n s
Racial discrimination. We opt for an inclusive approach and rely on the
definition used by the United Nations4
. Article 1.1. of the Intern a t i o n a l
Convention on the Elimination of All Forms of Racial Discrimination (1965)
defines racial discrimination as “any distinction, exclusion, restriction or
p re f e rence based on race, colour, descent, or national or ethnic origin which
has the purpose or effect of nullifying or impairing the recognition, enjoyment
or exercise, on an equal footing, of human rights and fundamental fre e d o m s
in the political, economic, social, cultural or any other field of public life”.
The strength of this definition lies in its breadth. It covers distinctions based
on race or colour and also distinctions based on descent (such as caste) and
national or ethnic origin. It catches measures which are intended to result in
inequality and measures that (with or without intent) have an unequal effect on
the rights and freedoms of the individuals and groups involved.
5
4 T h e re is a vast literature on the multiple meanings and diff e rent usages of the notion of
race. See, among many others, Ashley Montagu, ed., The Concept of Race, London: The
F ree Press, 1964; Henry Louis Gates, ed., “Race” – Writing and Diff e re n c e, Chicago:
University of Chicago Press, 1986; James Donald and Ali Rattansi, Race, Culture, and
D i ff e re n c e, Sage, 1992; and Michael Banton, Racial Theories, Cambridge University
P ress, 1999. For a short discussion of definitions, see also International Council, 2000, pp.
4 - 5 .
5 The definition does not cover distinctions based on gender, which are addressed by the
Convention on the Elimination of All Forms of Discrimination against Women (1979), or
distinctions that states make between citizens and non-citizens (Article 1.2).Racial and economic exclusion 5
Racial discrimination and stigma.
6 Discrimination occurs when individuals
a re unequally re w a rded for identical work or services or excluded from access
to opportunities for which they are equally qualified. Well-defined in law,
discrimination focuses on outcomes and can be identified and sanctioned
with relative precision. Stigma, by contrast, refers to perceptions and
attitudes – that certain groups are inferior in one or many ways based mere l y
on their membership in the group – which indirectly permit or pro m o t e
d i s c r i m i n a t o ry effects. Where dominant groups tolerate with equanimity the
continued and systemic marginalisation and impoverishment of other gro u p s
and justify their lack of discomfort in terms of that gro u p ’s failure to deserv e
equal treatment or living standards, they stigmatise the gro u p .
7
P o v e rty and economic exclusion. The poverty of poor United States citizens
(however they identify themselves) can rarely be compared usefully to that of
lower caste Indians or Twa. In this re p o rt, poverty and economic exclusion
refer to relative diff e rences in income and standard of living of victimised
g roups in a given society compared with the income of dominant groups in
the same society (or the average income of people living in that society). Tw a s
a re compared to Hutus or Tutsis in Rwanda and Burundi, African-Americans
c o m p a red to other North Americans, Roma compared to other Eastern
E u ropeans and so on.
The re p o rt
We start by illustrating how economic and racial discrimination re i n f o rce one
a n o t h e r, and then discuss how history influences moder n discrimination and
b e h a v i o u r. Short sections on attitudes and evidence of successful re f o rm are
followed by a final section of conclusions which incorporates some general
recommendations. These have been pre p a red in the hope that they will be
read, not as simple injunctions, but as pointers to help more detailed
reflection on an area of policy where pro g ress has been very hard to come by.
The International Council on Human Rights Policy undertook the pre p a r a t i o n
of this re p o rt, and its pre d e c e s s o r, in the context of the United Nations
World Conference against Racism, Racial Discrimination, Xenophobia and
related forms of intolerance. The World Conference ought to cause policymakers in many countries to give sustained attention to the pro b l e m s
described here. If they do, it is our hope that this re p o rt be of help in their
w o r k .
6 We borrow from Professor Glenn Loury (2001) who discusses the social implication of racial
inequality against the background of Charles Ti l l y ’s notion of categorical inequality (Ti l l y,
1 9 9 8 ) .
7 Both terms, of course, may be applied to gender as well as “race”.6 Racial and economic exclusion
II. THE PROBLEM
It is important to reiterate at the outset that the cases considered here are in
many ways hardly comparable. The experience of a Twa pygmy in the Gre a t
Lakes is very diff e rent from that of a Roma in Eastern Europe, or that of an
African-American in the United States. Diff e rences are evident in, among
others, social relations, legal status and re d ress, education, perception of
h i s t o ry and economic opport u n i t y.
Yet there is a critical commonality underlying these diff e rences. Members
of groups that suffer racial discrimination and poverty are prevented to a
significant extent from achieving their potential and as a group continue to do
so, compared with others in the same society.
8 They face obstacles at various
l e v e l s .
Impediments to equal tre a t m e n t
A first obstacle is unequal recognition under the law. Some victimised gro u p s
do not have citizenship rights or have diminished legal rights. In Japan,
people who are of Korean descent do not have full citizenship rights and are
not entitled to become Japanese citizens, even when their families have lived
in Japan for several generations. Long-time residents can apply for Japanese
citizenship and be naturalised under the 1950 Nationality Act, but must first
demonstrate “proof of assimilation”.
9
Palestinians’ standard of living has worsened dramatically because of
sustained and systemic discrimination against them and because of the
unequal status they are accorded under Israeli occupation. Israeli authorities
impose on the Palestinians living conditions (including the lack of
i n f r a s t ru c t u re utilities, the confiscation of land and the demolition of civilian
homes) which, among other effects, have led to increases in anaemia and
infant mortality rates.
1 0
In various parts of the world, unequal recognition was the rule until quite
re c e n t l y. In South Africa until the 1990s, people of African descent were
b a rred from standing for political office, from voting, from marrying whom
8 E x p ressed diff e re n t l y, the claim implies that members of groups that suffer less acutely will
m o re easily overcome social or economic disadvantages from which (as a group) they
s u ff e r. This description becomes helpful when comparing the success of diff e re n t
populations of migrants. All may start poor, all may suffer degrees of discrimination, but
some groups will integrate socially much faster than others and some will achieve rapid
economic success while others will not.
9 Human Rights Features, 2001.
1 0 See Ghaff a r, 2001.Racial and economic exclusion 7
they wished, and were excluded from access to good education or
p rofessional jobs. In many states in the United States until the 1960s, AfricanAmericans were denied equal access in law to, among others, public serv i c e s
and facilities. In the more distant past, slaves – for example, in the United
States and Brazil – were denied the status of citizens.
1 1
Other populations have been excluded from national legal regimes, for
reasons that were not (explicitly or intentionally) ideological or discriminatory.
This was the case of the Twa in the Great Lakes, the Shuar in Ecuador
and the Inuits in Canada. For many years, such groups lived apart fro m
m a i n s t ream society – separated from education and from the opport u n i t i e s
available to others.
F a i l u re to enforce laws or implement equal legal status is a second level of
obstacle. Some groups that suff e red legal discrimination in the past are in a
position to implement their rights and resist continued discrimination by legal
means; but others are not. Since the civil rights movement, AfricanAmericans in the United States have been protected (in broad terms) by antidiscrimination legislation and have been able to enforce many of those rights.
A middle class has emerged and numerous African-Americans have achieved
positions in society that would have been denied to their parents or
g r a n d p a re n t s .
1 2 By contrast, in many other societies, legal rights have been
granted but have not been implemented. Laws in India that protect Dalits
f rom discrimination are not generally applied. Consequently, the social and
economic position of Dalits has been slow to change. Discrimination in
employment and in access to education and other services is frequent, and
Dalits who claim their legal rights (to land for example) may face violent
reprisals. The law does not adequately protect or does not protect at all.
In very many societies, judicial and government institutions enforce the law
abusively and often with impunity. Conscious or unconscious racism on the
p a rt of justice officials protects discriminatory practices, even though they
may be forbidden in law. Corrupt or biased judges obstruct eff o rts to bring
anti-discrimination cases. For example, abuses of Dalits that reach the stage
of prosecution often go unpunished; and Afro-Brazilians cannot rely on the
law to protect their rights.
The conduct of police and law enforcement organisations is especially
i m p o rtant. In many societies – and the Dalits, again, are a prime example –
these institutions fail to protect marginalised groups from attack, or fail to
investigate threats or crimes against them as they should. In some societies,
1 1 See Genovese, 1967, pp. 7-9.
1 2 While pro g ress has been achieved in narrowing the racial gap in the United States,
disparities remain significant. See Loury, 1998 and 2000.8 Racial and economic exclusion
the police themselves are responsible for criminal violence against vulnerable
and discriminated gro u p s .
1 3 Violence in police custody, police harassment
and dispro p o rtionate rates of arrest are common problems. Even in the
United States, where victimised groups enjoy substantial formal legal
p rotection and a reasonably good legal remedial scheme, bias at the level of
e n f o rcement is common. Racial profiling is a case in point. According to a
s u rvey conducted in March-April 2001 by The Washington Post, the Henry J.
Kaiser Family Foundation and Harv a rd University, fifty-two per cent of AfricanAmerican men said that they have been unfairly stopped by the police
because they were black.
1 4
A third level of obstacle is unequal access to services that are crucial to the
l o n g - t e rm development of communities and individuals. Groups that suff e r
racial stigma may have equal status under the law, and may even be able to
e n f o rce that status. For a range of reasons, however, they may have
inadequate or unequal access to schools, housing, higher education, health
c a re and so forth. As a result, they are less skilled, less mobile, less healthy
and poorer – and so are their children.
For example, Brazilians of African descent have dispro p o rtionately high rates
of unemployment, illiteracy, and infant and adult mortality and low levels of
i n c o m e .
1 5 Though they are among the categories most in need of social
p rotection, Romani communities in Eastern Europe continue to be unable in
practice to access many social services, health care and housing
p rogrammes in part i c u l a r.
1 6 Similar patterns are to be found among AfricanAmericans, Canadian native peoples, Australian aborigines and the Tw a .
A fourth type of obstacle is more informal. Especially where there is a long
h i s t o ry of racial discrimination, social as well as economic and political
relationships may be separated. Marginalised groups are excluded fro m
social networks and thereby from access to contacts and opportunities that
a re available to others – recommendations for loans, information about job
openings, business contacts and so on. Persistent racial disparities continue
in part because of such informal social exclusion.
1 7
1 3 A c c o rding to the Rio de Janeiro-based Instituto de Estudos da Religião (ISER), among
those killed in 1998 by the police in Rio de Janeiro – a city roughly divided between whites
and non-whites – seventy per cent were black or p a rd o ( b ro w n - s k i n n e d ) .
1 4 See also Randall Kennedy, 1999. Kennedy notes that “[R]acial profiling constantly adds to
the sense of resentment felt by blacks of every social stratum toward the law enforc e m e n t
establishment. Iro n i c a l l y, this is a cost of racial profiling that may well hamper law
e n f o rc e m e n t . ”
1 5 See Buckley, 2000.
1 6 See Zoon and Templeton, 2001.
1 7 See, for example, Ti l l y, 1998, pp. 7-8; and Loury, 1999.Racial and economic exclusion 9
In sum, such victimised groups suffer diff e rent degrees of disadvantage.
African-Americans face relatively little formal discrimination – certainly by
comparison with most of the other groups studied. Nevertheless, they re m a i n
stigmatised and in many parts of the country suffer unequal access to
essential services, or because the services to which they have access are of
lower quality. Like African-Americans, indigenous peoples in Canada can
s e c u re access to educational and health services (if they can aff o rd them),
but live in physical separation from mainstream society. Roma and Dalits
experience high levels of discrimination and are stigmatised to a severe
d e g ree. The legal status of Twa pygmies is even less protected than that of
Dalits in India. Dalits, Roma and Twa are often denied access to essential
s e rvices, such as health or education facilities (even when these are
a v a i l a b l e ) .
T h e re is evidence here of a relationship between levels of discrimination and
levels of stigma. Where discrimination is effectively curbed, stigmatisation
is likely to be less, or to be less overt. To the degree that stigma is a dire c t
e ffect, it suggests that legal sanctions are valuable even when they are
applied imperf e c t l y.
The crucial uniting element is economic. In the societies studied, the
economic gap between dominant groups and groups subject to racial stigma
has not closed, is not closing and in some cases is widening. This is so even
though many legal interventions have been made to protect the rights of
disadvantaged groups in some countries and in others aff i rmative action
policies have been in operation for years. In all cases, the poverty divide and
the accompanying signs of social dislocation persist or have worsened.
The poverty gap
In the United States, nearly a century and a half after the end of slavery, social
life is still characterised by significant racial stratification. Substantial
disparities between blacks and whites exist in wages, unemployment rates,
income and wealth levels, ability test scores, incarceration and criminal
victimisation rates, health and mortality statistics.
Between 1987 and 1993 in India, the percentage of Dalits living below the
p o v e rty line increased by five per cent. Half the Dalit population lived below
the poverty level in 1993 as compared with thirty per cent of the general
population. In the years since 1993, the poverty gap has widened even
f u rt h e r, accompanied by the state’s continued failure to allocate and
distribute re s o u rces equitably.
1 8
1 8 See Narula and Macwan, 2001; and Human Rights Watch, 1999. These analyses highlight
the fact that caste systems are essentially economic orders that allocate labour on the
basis of descent.1 0 Racial and economic exclusion
In Brazil, consistent and dramatic disparities exist between the black and
white populations in infant mort a l i t y, maternal mort a l i t y, and mortality fro m
e x t e rnal causes. Infant mortality rates are sixty-two per cent for Afro -
Brazilians and thirty-seven per cent for white Brazilians. Access to piped
water is significantly lower for Afro-Brazilians (sixty-four per cent) than for
white Brazilians (eighty-one per cent). Life expectancy figures reveal that,
though females generally live longer than males, in Brazil black women die
earlier than white men. Studies indicate that wage diff e rences in Brazil rise
with the level of education of black workers;
1 9 some re s e a rchers argue that
discrimination increases with social status and income.
20
In Ecuador, economic inequality between indigenous peoples and the rest of
the population has tended to widen as the Gross National Product has gro w n
– even though Ecuadorian indigenous groups have a relatively strong re c o rd
of developing their own political and economic institutions.
2 1
Other cases confirm a similar pattern. In post-apartheid South Africa the
number of black households earning as much or more than the average white
household has risen from less than one thousand to 1.2 million in less than a
decade. However, those gains were concentrated in a black upper- m i d d l e
class that benefited from the new govern m e n t ’s aff i rmative action policies.
Over the same period, the average annual income of the poorest forty per
cent of black South Africans declined as the govern m e n t ’s re s t ructuring of
the economy failed to create jobs for unskilled workers.
2 2
In Australia, indigenous people remain similarly disadvantaged in comparison
with the non-indigenous population. In the nort h w e s t e rn part of the country,
the Yamatjis have experienced a long history of dispossession and
m a rginalisation. To d a y, the unemployment rate amongst the Aboriginal
population is twenty-four per cent compared with an average eight per cent
for the rest of the population. Forty-eight per cent of indigenous households
e a rn less than $500/week compared with four per cent of non-indigenous
h o u s e h o l d s .
The skills gap
Access to education is central to equality of opportunity but education
systems tend consistently to fail victimised communities. They often
perpetuate racism and discrimination, while members of historically
victimised groups tend to under-achieve, transmitting inequality to the next
g e n e r a t i o n .
1 9 Mapa da População Negra no Mercado de Tr a b a l h o, 1999.
2 0 Dillon Soares, 2000, for instance.
2 1 I t u rralde, 2001.
2 2 P e t e r, 2000, pp. 1 and 6.Racial and economic exclusion 1 1
In India, a high number of Dalit children drop out of school.
2 3 Many do so to
supplement their family’s income or because they cannot pay school fees.
Some leave because they lose faith in education. Dalit children are often
made to sit at the back of classrooms and face physical and verbal abuse
and other degrading treatment from their teachers and classmates. The
literacy gap between Dalits and other Indians has remained virt u a l l y
unchanged: between 1961 and 1991 it fell by only 0.39 per cent.
A government quota policy exists to ensure that Dalits have access to skilled
employment. However, fifty-four per cent of quota places in the central
g o v e rnment, and more than eighty-eight per cent of places in the public
sector remain unfilled. Individuals from higher castes occupy ninety per cent
of university teaching posts in the social sciences and ninety-four per cent in
the sciences, while Dalits (who re p resent approximately twenty per cent of
the Indian population) hold just 1.2 and 0.5 per cent of these posts.
In the Great Lakes region, less than 0.5 per cent of the Twa population have
completed secondary school. Vi rtually none has a university degre e .
N u m e rous obstacles to obtaining an education exist, including fees, the cost
of materials, and discriminatory treatment by teachers and other childre n .
24
In nort h w e s t e rn Australia, only seven per cent of the Aborigines have a
university degree, compared with thirty per cent for the rest of the population.
Because they have fewer qualifications, members of victimised groups tend
to take blue collar and unskilled jobs. In many regions, these have been
p a rticularly affected by global changes in the international economy, furt h e r
d e p ressing the relative income levels of these groups compared to others
which are better educated or have better access to the modern economy.
L a n d
Land has a special social significance for many groups, and particularly for
many indigenous peoples. For such groups, land is also an essential sourc e
of economic livelihood. In the absence of other marketable skills or an
a l t e rnative economic foundation, it is a crucial economic re s o u rce. In this
respect, culture and economy cannot be separated.
In Canada, government relocation of many hundreds of indigenous
Canadians weakened or destroyed their economic self-sufficiency and had
serious adverse health effects. The Innu, a traditional nomadic hunting and
fishing people, now have one of the highest suicide rates in the world and an
a b n o rmally high level of infant mortality and alcohol-related deaths.
2 5 T h e i r
2 3 The rates are as follows; at the primary level: 49 per cent; at middle school level: 67 per
cent; at secondary school level: 77 per cent. See Narula and Macwan, 2001.
2 4 See Save the Children, 2001.
2 5 Jacko, 2001.1 2 Racial and economic exclusion
lifestyle has been affected by a major hydroelectricity development in
L a b r a d o r, and by military flying exercises. At the same time, no altern a t i v e
economy has emerged. To protect Indian rights, the Canadian govern m e n t
p rotected Indian land and pro p e rty while restricting the powers of indigenous
political leaders to initiate and regulate business activity.
2 6 As a result, private
investors have felt unable to cover their risk.
In Brazil, twelve years after the Brazilian Constitution recognised the right to
p ro p e rty of q u i l o m b o s ( rural communities of people descended from African
slaves), very few have been able to obtain title to land. Lack of re g u l a t i o n ,
conflicts between diff e rent governmental branches, pre s s u res fro m
companies and individuals interested in these lands, and lack of political will
have prevented these communities from securing land rights.
In India, most Dalit victims are landless agricultural labourers. Those few who
do own land fall into the category of marginal landowners. As land is the
prime asset in rural areas, this lack of access to land makes Dalits part i c u l a r l y
vulnerable economically.
Lack of statistical inform a t i o n
In many countries, public statistics are not available, are not precise or are
not disaggregated. As a result it is impossible to assess the degree to which
p a rticular groups are subject to discriminatory practices by police and justice
o fficials, how they make use of education and other services, participate in
the economy, and whether they enjoy a higher or lower standard of living. This
is of course a matter of critical importance. Without accurate inform a t i o n ,
claims cannot be verified, nor can the effectiveness or relevance of public
policies to reduce discrimination and disadvantage be assessed.
B r a z i l ’s experience illustrates this point well. Brazil imported the larg e s t
number of enslaved Africans between the sixteenth and nineteenth centuries
and was the last country in the Americas to abolish slavery, in 1888.
2 7
S u b s e q u e n t l y, many European workers were imported into the country
because it was claimed that black workers were inferior. A myth of “racial
democracy” was developed subsequently to support Brazilian nationalism.
2 8
During most of the twentieth century, while sharp inequalities between blacks
and whites were evident, Brazil’s white elites were able to deny the existence
of racial discrimination in the country. Indeed, in the period immediately after
2 6 In Canada, the Indian Act gives decision-making power and fiduciary responsibility over
re s e rve lands to the Minister of Indian Affairs in certain circumstances. There are over six
h u n d red First Nations in Canada. The administrative burden hinders swift economic
decisions and does not give indigenous leaders incentives to develop their own
administrative infrastru c t u re .
2 7 Some 3.5 million, re p resenting thirty-eight per cent of all African slaves brought to the
Americas, according to some estimates. See Mattoso, 1982.Racial and economic exclusion 1 3
Brazil ratified the Convention for the Elimination of Racial Discrimination,
i n f o rmation about colour and race was actually eliminated from the 1970
c e n s u s .
2 9
This myth of “racial democracy” was not challenged seriously until the late
1970s, when re s e a rchers began producing detailed statistics, disaggre g a t e d
by race. These data illuminated the extent of discriminatory practices. One
1999 study, for example, showed that blacks were between seventeen and
f o rty-five per cent more likely to be unemployed than whites, and that
considerable and consistent disparities in income existed between black and
non-black workers in select metropolitan areas. Another, in 1997, showed
that thirty-two per cent of the housing occupied by Brazilians of African
descent was inadequate (according to objective criteria) compared to twelve
per cent of housing for whites.
Collection of sound statistics is no doubt a pre - requisite for any successful
strategy to advance the rights of victimised groups. At the same time,
statistics may also be used to re i n f o rce stereotypes, and care should be
taken to ensure that individual privacy is adequately pro t e c t e d .
2 8 It included the idea that Iberian elites created a cordial and harmonious form of race
relations in the country, and the idea that slavery in Brazil was relatively benevolent. It was
a rgued that the intimate relations between masters and slaves, and the absence of
legalised racial segregation after abolition, were evidence of a non-racist society. See
Nascimento and Nascimento, 2000.
2 9 Roland, 2001, pp. 10-11.1 4 Racial and economic exclusion
III. THE INFLUENCE OF HISTORY
Discrimination and poverty are associated over significant historical periods.
In India, the caste system is over two thousand years old. The Roma have
lived in Europe for over a thousand years and in doing so have adapted in
n u m e rous ways to diff e rent European societies while retaining a distinct way
of life. Historical attitudes of Romas towards the communities that surro u n d
them, and of those communities towards Romas, evidently influence their
relations. In the formerly slave-owning societies of Brazil and the United
States, people of African descent have lived for two or three hundred years
alongside the settler populations that are dominant. Relations between the
two groups have been shaped in distinct ways by slavery and its effects. By
contrast, “first” or indigenous peoples in Canada or Ecuador preceded the
settlers who are now dominant in those countries. Their relations more closely
resemble those of a colonial kind. (This is true at least in the sense that the
original peoples can no longer claim access to land in the ways that they
could.) Finally, groups like the Twa have traditionally lived alongside
neighbouring peoples – who are not recent settlers – in a separate but
symbiotic relationship that recently has become more competitive in re l a t i o n
to land and re s o u rc e s .
C o n f ronting the past
All these societies are marked distinctively by their histories. Equally distinct
p a t t e rns can be found elsewhere in the world. Plainly, strategies to reduce the
victimisation need to take account of historical factors, their influences on
attitudes, on poverty and on the legal environment. While the history of every
society is particular and local, some general indicators are perhaps especially
relevant to assessing the context.
One useful indicator is a tradition of resistance and re f o rm, or its absence.
W h e re a victimised group has struggled to end forms of oppression and won
i m p o rtant re f o rms – an end to slavery, an end to apartheid, full citizenship,
abolition of discriminatory legislation – its social as well as political and
economic status will normally have improved. Winning re f o rms will also alter
p e rceptions and attitudes within the group, both of the larger society and to
its place in it.
In the United States, the civil rights movement – perhaps even more than the
movement against slavery – transformed the position of African-Americans. It
did so, not simply because important re f o rms were achieved, but because
the movement demonstrated to African-Americans (and other Americans)
that they could take re f o rm into their own hands. The movement of theRacial and economic exclusion 1 5
landless in Brazil and the Dalit rights movement in India have a similar
potential to transform the status of marginalised groups in those societies.
In any analysis, success will ultimately depend heavily on the ability of
victimised communities to lead political eff o rts to improve their situation and
take responsibility for making sure that re f o rm is implemented in a sustainable
and responsible fashion. In this context, the combat against apartheid, and
the post-Holocaust struggle against anti-Semitism (especially in the United
States and, to a lesser degree, in Europe) are examples of eff e c t i v e
re s i s t a n c e .
The historical success of victimised groups in achieving visible and eff e c t i v e
political re p resentation is a second element. In the long term, victimised
g roups are not likely to transform their social and economic status without
political re p re s e n t a t i o n .
3 0
The quality and the effectiveness of a community’s
political leaders and their ability to build alliances within mainstream society
a re crucial components of long-term pro g ress. In Guamote, Ecuador, the
indigenous organisations opposed political participation as well as
p a rticipation in local markets for many years, a strategy aimed at intern a l
s t rengthening. In 1992, they participated in the municipal elections and
c a p t u red every seat on the town council. The new Council elected as its
mayor an indigenous professional chosen by the population, established a
cantonal parliament made up of the heads of the one hundred and fourt e e n
communes, and brought together NGOs to form a local development
committee. This part i c i p a t o ry municipal stru c t u re has enabled the indigenous
re p resentatives in Guamote to pre p a re a long-term development plan. Public
works and services are implemented by the community org a n i s a t i o n s
themselves or by local co-operatives.
In other cases, however, resistance to oppression does not occur. This is tru e
of the modern Dominican Republic, where the political authorities invented a
c a t e g o ry of “natives” (Indians), even though the indigenous population had
been wiped out during the first occupation by Europeans. A political myth
that allegedly paler, straight-haired Dominicans were superior to allegedly
d a r k e r-skinned Haitians confused and paralysed political mobilisation in a
society that had staged one of the first successful rebellions against slavery.
3 1
The myth of racial integration in Brazil had a similar eff e c t .
A third indicator is the degree to which victimised groups internalise their
o p p re s s i o n .
3 2
In India, many Dalits – and many lower non-Dalit castes who
3 0 This is a delicate area whenever groups are a small percentage of the population, or are
s c a t t e red across many electoral districts. A balance needs to be struck in such cases
between respect for democratic principles and protection of the rights of victimised gro u p s .
3 1 See Equipo Onè-Respe, 1997.
3 2 See International Council, 2000, pp. 20-21.1 6 Racial and economic exclusion
s u ffer discrimination which is only slightly less extreme – accept their status
in accordance with Hindu belief that they have been morally guilty in a
p revious life. They have internalised the values of the system that oppre s s e s
them. To a degree, such fatalistic perceptions are also found among the
indigenous Indian communities in Guatemala, Mexico and Peru. In the
context of a very long history of economic and racial discrimination, of cro s s -
generational expectation of second-class status and povert y, it is
unsurprising to see such re a c t i o n s .
Another response is the re t reat into a distinct culture. The Romani experience
(which takes many local forms throughout Europe) is a case in point. Such a
response inter nalises the expectations of the wider society and brings its own
risks. A self-isolating group is politically visible and there f o re vulnerable; it
may also fail to adapt to changes in the wider society and this can incre a s e
its economic vulnerability. Accustomed traditionally to living rather separately,
dependent economically on trading with local communities, Roma in
Romania, Hungary, Bulgaria and the Czech Republic were severely disru p t e d
during the Communist period by policies that re q u i red them to live in
p e rmanent housing and work in factories. After the fall of communism, most
Roma lost or left their factory employment but found their old markets were
no longer viable.
In other cases, isolation was traditional and victimised groups were
historically never welcomed within mainstream society. In Ecuador and in
Brazil, small and little known tribes traditionally lived isolated from the rest of
s o c i e t y. In some instances, seclusion was encouraged, for example to pro t e c t
a group from disease. Historically, the Twa pygmies traded intermittently and
i n f o rmally with surrounding peoples in the Congo, Burundi and Rwanda, but
lived an essentially separate existence which they were able to do because
their occupation of forest areas was unchallenged. For communities like
these, difficulties arise when isolation ends and the group chooses or is
f o rced to engage with mainstream society. In the case of the Twa, changes in
land law and the encroachment of other communities deprived them of
access to land, while their isolation meant that they were less equipped
educationally and financially to compete in the local economy. The result has
been a worsening of discrimination and stigmatisation, while poverty and
illness have sharply incre a s e d .
A final historical pattern is that individuals in some victimised groups re s p o n d
to discrimination by denying their identity. Some people of Korean origin in
Japan have adopted this stratagem, as have some Twa in order to keep their
positions as public servants. Where it becomes widespread, this re s p o n s e
will clearly tend to weaken political mobilisation within the community
c o n c e rned. This sort of denial is sometimes used against these persons
without a proper understanding of the circumstances that caused them to soRacial and economic exclusion 1 7
act in the first place. In practice, many who adopt such “false identities” suff e r
m o re acute discrimination if they are discovere d .
Note that mainstream society does not always have the same perception of
its history as the victimised groups. Perceptions of the overt h row of some
colonial systems illustrate this point well. In some countries, the “off i c i a l ”
h i s t o ry – the history mandated and told by the dominant group – is a narr a t i v e
of the attainment of political libert y, and the achievement of independence
continues to re p resent an important political re f e rence point. Cert a i n l y, this
appears to be true of India, Brazil, Ecuador, the United States and Canada.
Yet, in India, Dalit interests were originally recognised by India’s anti-colonial
leaders but were subsequently subordinated to the political interests of
the majority. For African-Americans in the United States, the fight for
independence was by no means a fight for their independence. The Twa in
the Great Lakes and the indigenous populations in Ecuador were larg e l y
untouched by the anti-colonial movement. Where mainstream and minority
p e rceptions of history differ widely, this too has implications for the capacity
of victimised groups to organise themselves politically and to be understood
and heard by mainstream opinion.
Victimised groups are acutely aware of their history, which is rich in stories of
s u ffering, separation, exclusion and injustice. Where a powerful historical
tradition exists, victims can be astonishingly forbearing, as Dalit communities
have been. Wherever the desire for equal or fairer treatment gro w s ,
n e v e rtheless, dissent and re p ression of dissent are likely to follow, cre a t i n g
conditions that threaten political stability. When members of a marg i n a l i s e d
g roup, such as African-American youth in urban ghettos, behave in selfd e s t ructive ways, it is important to understand the extent to which such
p a t t e rns of behaviour reflect an experience of deprivation and oppre s s i o n ,
within which those individuals function.
3 3 R e f o rm should, there f o re, re d re s s
re s o u rce disparities between groups, but it should also attend to the ways in
which racial socialisation is constructed, in order to avoid the perpetuation
into yet another generation of the legacy of racial stigma.
In many instances, the demand that historical injustices should be
acknowledged publicly and officially by relevant authorities has been at the
c e n t re of political disputes in which victimised groups are involved. A n
understanding of history and acknowledgement of historical wrongs are
essential to any honest and accurate evaluation of the present. Policies to
a d d ress the situation of victimised groups, which ignore this history will not
be eff e c t i v e .
3 3 L o u ry, 2001, p. 8.1 8 Racial and economic exclusion
The reparations arg u m e n t
As preparations began for the United Nations World Conference against
Racism, the issue of reparations came to take centre stage. It was arg u e d
that just as Holocaust survivors were compensated financially by several
E u ropean countries for the loss of their possessions and the extraord i n a r i l y
inhuman treatment they suff e red, and just as Japanese-Americans interned in
World War II were paid compensation by the United States government, so
descendants of Africans enslaved and resettled in Brazil, the United States
and elsewhere should receive compensation for their suff e r i n g s .
The claim in favour of reparation has two elements: a demand that the crime
of slavery (and its legacy of legal discrimination) be acknowledged, and a
demand for material compensation to those who were enslaved.
3 4
It is not the
place here to discuss how strong the legal case might be, or how feasible it
might be to attach real sums of compensation to the many descendants of
individuals enslaved two or three hundred years ago.
3 5
It is unlikely that
the United States or European Union governments will acknowledge the
responsibility of their societies for slavery, if doing so might cause them
subsequently to incur open-ended financial claims for reparations to slaves’
descendants. The Brazilian Parliament recently considered several bills
on this subject. It concluded that, while individual compensation would be
impossible to adjudicate fairly and would produce numerous anomalies of
payment, the idea of creating a national endowment for the benefit of
Brazilians descended from slaves was worth exploring. Such a sum might be
understood as a development fund or an undiff e rentiated form of financial
c o m p e n s a t i o n .
Under any circumstances, however, there can be no doubt that financial
transfers are an essential element of any forw a rd-looking national or
i n t e rnational strategy that will enable victimised groups to acquire the skills
and assets they need to operate on equal terms in their societies.
P e rceptions and capacity
Historical discrimination is responsible for the economic deficit from which
victimised groups suffer today – a relative lack of capital and re s o u rces and
skills which prevent such groups from developing at the same speed as the
society as a whole, and which it will take considerable investment to remove.
3 4 Another part of the claim to reparations is the sense of injustice that the victimised feel that
the victimisers are often able, indeed allowed, to continue to benefit from the privileges of
that victimisation in the past.
3 5 See, notably, Gary, Hitt, Pires, Scruggs and Sweet, 2000; and Robinson, 2000.Racial and economic exclusion 1 9
R e s o u rces are only one aspect of the historical legacy, however. Attitudes in
dominant and victimised communities have also developed over a long
period. These attitudes are deeply held and may be antagonistic to changes
that are essential if the victimised community is to pro g re s s .
The discrimination and economic exclusion experienced by victimised gro u p s
favour the emergence of social behaviour that confirms (or appears to justify)
racial stereotypes about poverty and antisocial conduct.
3 6 Roma and AfricanAmericans, and other groups, are consistently stigmatised as illiterate,
criminal and sexually feckless while their collective experience of exclusion
and discrimination encourages the very behaviour that is stigmatised.
Statistics showing high unemployment and poverty among the discriminated
g roup are used as evidence of the inferiority and lack of morals of that gro u p .
Yet the statistics are not false (though they are misleading) – victimised
communities are indeed poore r, do have lower levels of scholastic
achievement, and often do score higher than average on measures of dru g
use, alcoholism, and criminal behaviour. In a vicious cycle, behaviour
re i n f o rces attitudes, which in turn buttress stereotypes that are transmitted
f rom generation to generation.
This situation is exacerbated wherever the response of government is to
criminalise the group concerned. A dispro p o rtionate number of AfricanAmerican men are held in United States prisons.
3 7 The war on drugs has
been devastating to African-Americans: blacks are incarcerated on dru g
c h a rges at a rate thirteen times greater than that of white men.
3 8 S u c h
contrasting impact itself strengthens the stigma from which these gro u p s
s u ffer while further undermining the gro u p ’s economic and social cohere n c e .
In Canada, where social policies are more liberal, re s e a rchers tended to
blame the victims for their predicament. Social re s e a rch generated theories
about the shortcomings of Native Peoples rather than knowledge about the
inadequacy of the system in which they must surv i v e .
39
The media have a particular responsibility to avoid stereotyping. In 1997, a
Yale University study found that United States news media portrayed most
poor people as black whereas most people below the poverty line are white.
3 6 R i c h a rd Herrnstein and Charles Murr a y ’sThe Bell Curve – Intelligence and Class Stru c t u re
in American Life, (Free Press, 1996), which relates economic success and intelligence to
e t h n i c i t y, is an example of such flawed reasoning. For a response to that argument, see
B e rnie Devlin, 1997.
3 7 One in twenty African-American men over eighteen is in jail, compared to one in one
h u n d red and eighty of the whole population. Human Rights Watch, 2000.
3 8 Human Rights Watch, 2000, p. 4-5.
3 9 Saint Denis, 1989.2 0 Racial and economic exclusion
Magazines like Ti m e and N e w s w e e k showed blacks sixty-five per cent of the
time to illustrate stories about povert y, though only twenty-nine per cent of
poor Americans are black. The author concluded that media re p re s e n t a t i o n s
not only perpetuated stereotypes about race but also fuelled discontent
among whites about the welfare system.
4 0
Quite clearly, victimised communities should not be blamed for the effects of
consistent historical discrimination. The important conclusion to draw is that
those effects are real. Victimised communities are likely to be re l a t i v e l y
u n o rganised, relatively unskilled in financial management, distrustful of
( e x t e rnal) authority and unused to political leadership. They will not suddenly
a c q u i re relevant experience and expertise with the arrival of re s o u rces and
new opportunities. In general, their leaders will not be less corrupt or more
selfless than political authorities in wider society.
It is there f o re essential to ensure that victimised groups are politically
re p resented and politically visible. If change is to be sustained, the gro u p s
need to manage their institutions and their re s o u rces. It is equally essential to
invest in education and skilled employment. These are not simple or short -
t e rm tasks. To achieve change, national authorities and international donors
need to make significant transfers, and accompany the process to ensure
that these are invested pro d u c t i v e l y, over a long period.
Evidence of pro g re s s
T h e re is encouraging evidence that pro g ress in dealing with historical
discrimination can take place, but not surprisingly it is every w h e re conditional
and uneven. In the United States, anti-discrimination legislation has cert a i n l y
i m p roved the position of African-Americans, and the work of legal and social
o rganisations to defend and entrench civil liberties has been effective on
many fronts. Overt discrimination and violence against African-Americans
have both declined in the last forty years. An African-American middle class
has emerged and there have been significant improvements in educational
achievements and access to professional jobs. To d a y, African-Americans
enjoy a more visible social and political profile in the United States.
N e v e rtheless, the re c o rd is uneven. Many African-Americans are
disenfranchised as a result of legal regulations that disbar felons from voting.
C o m p a red with any other group of Americans, there is a conspicuous
disparity in the pro p o rtion of young African-Americans who are charged with,
and jailed for, misdemeanours and crimes. Though middle class AfricanAmericans enjoy a similar quality of life to other middle class Americans, a far
4 0
“ Yale Study: Most Poor People in National Media Portrayed as Black”, Associated Pre s s ,
August 18, 1997.Racial and economic exclusion 2 1
higher pro p o rtion of African-Americans remain poor or very poor compared to
the average, and many of their children live in social conditions that
disadvantage their educational or professional pro s p e c t s .
The Dalits have had nominal legal protection since 1955, but, in practice, it is
only relatively recently that a Dalit rights movement has taken form. That
movement is beginning to acquire influence. Local trade campaigns have
been effective. Legal aid programmes have taken many cases to court ,
raising awareness in the community and occasionally winning cases against
l a n d l o rds or on behalf of Dalits who have suff e red violence or discrimination.
Alliances have been built as well – with groups from other castes, and more
recently with inter national movements during preparations for the Wo r l d
C o n f e rence. Nevertheless, violence against Dalits continues to occur
w h e rever they claim their rights, the political authorities in India re m a i n
unsympathetic to Dalit demands, and the judiciary and security forc e s ,
including the police, frequently fail to protect Dalits from attacks by gangs or
indeed are themselves responsible for abuses or violence against Dalit
activists or women.
4 1
Indigenous peoples in Ecuador have demonstr ated great strength of
o rganisation, enabling them to maintain high levels of social cohesion, defend
their languages and traditional forms of authority, culture and tradition, and to
manage effective relations with national organisations. Their status within the
state administrative stru c t u re has improved over recent years, culminating in
the establishment of a set of indigenous territorial subdivisions under the
1998 Constitution.
4 2 By arrangement with the ministry of education, the
Shuar community is now responsible for its re g i o n ’s schools. It operates
several developmental and health projects, and has a small air transport a t i o n
s e rvice. Flexible arrangements have been reached with the armed forces in
respect of compulsory military service; young Shuar people may carry out
such service without leaving their own terr i t o ry and are not forced to adopt
m i l i t a ry practices they see as a threat to their identity and tradition.
Successful implementation of projects has attracted direct investment fro m
national and international sourc e s4 3 and Shuar have successfully competed
for local government posts (elected and appointed). In addition, they have
4 1 Human Rights Watch, 1999.
4 2 This process dates back to 1930, when industrial action taken by peasants and people on
state-owned ranches provided a model for agrarian trade unionism. That gave rise to the
1937 Communes Act, the legal basis for a movement which struggled for agrarian re f o rm
in the 1960s and 1970s and then became strong enough to found the indigenous
o rganisations in operation today.
4 3 The InterAmerican Development Bank invested half a million dollars in small projects run by
the Shuar Federation.2 2 Racial and economic exclusion
generally increased their political influence with governmental bodies and
political parties and in the national indigenous movement.
4 4
These examples suggest that change can be engineered with some success
w h e re
• the wider political environment is tolerant of, or supports re f o rm,
• the victimised group has some political or economic leverage, and
• it has well-organised and well-led political and economic institutions.
4 4 See Iturralde, 2001.Racial and economic exclusion 2 3
I V. CONSEQUENCES FOR POLICY
The problem discussed here is essentially a simple one, though it occurs
in widely diff e rent societies and its expression takes many forms. It is not
d i fficult to see that links exist between racial discrimination and economic
exclusion, even if the severity of discrimination (both in past times and today)
has varied greatly from case to case. Though easy to recognise, however, the
p roblem is difficult to attack. It has deep historical roots, economic intere s t s
a re at stake, and attitudes (on both sides of the discrimination) are
e n t renched and self-re i n f o rc i n g .
Change will be slow. Planners should make arrangements for sustained
i n t e rvention over a long period. Reform will be expensive. Sustained transfers
of re s o u rces are an essential component of any serious re f o rm programme in
relation to entrenched discrimination.
Remedial policies must there f o re attack the problem from diff e rent angles and
in complementary ways. Single interventions will fail. Given the nature of the
case, an effective approach must address, at a minimum:
• legal rights,
• political re p re s e n t a t i o n ,
• economic re s o u rc e s ,
• provision of key services such as education, and
• attitudes and perc e p t i o n s .
G e n e r a l
Public authorities should name and condemn discrimination w h e re they find
it, and they should be vigilant in seeking it out. Silence and denial simply
perpetuate it and protect the interests of those who discriminate. By contrast,
o fficial and formal acknowledgement of discriminatory practices lends
legitimacy to the claims of those who are victims, and makes it simpler, and
s a f e r, for ord i n a ry citizens to condemn such practices. To d a y, in the United
States, discussion of discrimination against African-Americans has become
open. This is not the case every w h e re. For example, the authorities in India
a re in denial that there is discrimination against Dalits.
I n t roduce no new policy that will make the situation worse.
Take account of history. Public authorities should acknowledge historical
w rongs and their effects. This is probably an essential component of any
strategy to change public attitudes, both in mainstream society and within
the victimised group in question. Without an understanding of historical2 4 Racial and economic exclusion
b a c k g round, more o v e r, policies to address modern problems are less likely to
s u c c e e d .
Contextualise re f o rms. The forms that racial and economic discrimination
take are influenced by a country ’s history, culture and institutions. In
designing any strategy, it is essential to take the local context into account.
Strategies are needed both to deter and to re m e d y.
Legal action and enforc e m e n t
National legislation banning discrimination on grounds of race is essential. If
historically oppressed groups are not recognised and protected in law, they
cannot advance and protect their rights.
While legislation is of vital importance in protecting against racial
discrimination, to become effective, laws must be enforced and must be
s u p p o rted by complementary action in other areas. Legal prohibition of
discrimination, alone, will not remove racial bias in a society.
Enact legislat ion against discriminat ion. M e a s u res should pro h i b i t
discrimination by public authorities and institutions as well as private
individuals and entities. Legislation should also set out pro c e d u res in the law
for pursuing and enforcing a remedy in the case of discrimination.
Review existing laws and policies. G o v e rnments should review existing laws
and policies for discriminatory effects, and should repeal or amend legislation
w h e re it is appro p r i a t e .
Include effective remedies in anti-discrimination laws. Remedies and
recourse pro c e d u res should be aff o rdable, understandable and rapid.
Penalties for discrimination should be substantial. In the first instance,
g o v e rnments should aggressively prosecute criminal and civil actions against
d i s c r i m i n a t o r s .
E n s u re official institutions’, including police and law enforcement serv i c e s ,
re s p e c t . Police and law enforcement officials should be held personally
accountable in law for acts of discrimination. Public institutions should also
be made accountable in law for acts by their re p resentatives that are
d i s c r i m i n a t o ry in intent or in eff e c t .
Educate against discrimination in the justice system. Authorities should take
steps to provide human rights and antidiscrimination training for judges,
p rosecutors, police officers and other officials in the justice system.
Compile accurate statistics. G o v e rnments should ensure that off i c i a l
statistics make it possible to track discrimination in the economy, in incomes,
in education and health and other relevant areas, participation in public
institutions, and to monitor pro g ress in reducing discrimination over time.Racial and economic exclusion 2 5
W h e re necessary, statistical services should be created or stre n g t h e n e d .
Statistics should be appropriately disaggregated by race, descent, gender
and age and should be published re g u l a r l y.
S t rengthen monitoring. G o v e rnments should strengthen independent
monitoring of official institutions, for example by national human rights
institutions and ombuds off i c e s .
Adopt temporary remedial measures. G o v e rnments should create temporary
remedial measures, sometimes called aff i rmative action, as outlined in Art .
1(4) of the International Convention on the Elimination of All Forms of
Racial Discrimination, in order to create conditions in which historically
disadvantaged communities can enjoy the same opportunities as others.
These measures should focus on outcomes. They should not appear to
condescend to oppressed groups or appear to be discriminatory.
Political re p resentation and re c o g n i t i o n
Victimised groups will not make pro g ress if they have no political leverage.
The participation of victimised groups in decisions that concern them, and
bodies that are relevant to them, should be encouraged.
Communities that suffer racial and economic discrimination are often
politically invisible. It is essential to make sure that such groups are politically
re p resented within public institutions, and that re p resentatives of such gro u p s
a re accountable to their communities, empowered to re p resent them and
competent to communicate their interests eff e c t i v e l y.
E n s u re re p resentation in public institutions including national govern m e n t
and parliaments, local governments, the judiciary and police, national human
rights institutions and official anti-discrimination bodies, and the media.
Monitor such re p resentation. The presence of historically marg i n a l i s e d
g roups in public institutions should be monitored and re p o rted publicly.
Bodies that monitor discrimination, including national human rights
institutions, should take the lead in this matter.
I n c rease part i c i p a t i o n . The democratic participation of victimised groups in
decisions that concern them should be encouraged. Eff o rts should be made
to ensure that members of such communities are re g i s t e red to vote and can
p a rticipate actively in elections, and more broadly in decisions that concer n
t h e m .
Accompany re f o rm . Communities will need to be supported during the
p rocess of re f o rm. Providing re s o u rces without strengthening capacity is a
recipe for disillusion and failure – as would any attempt to re f o rm that is not
s u p p o rted and eventually led by the community concern e d .2 6 Racial and economic exclusion
R e q u i re “impact assessment”. Authorities often fail to consider the impact of
decisions on historically marginalised groups. Authorities should consider
the impact of any proposed legal, social, or economic programme on such
communities before implementing them. Communities should be consulted
actively about decisions that affect them. No programme should worsen the
position of such gro u p s .
Finance and transfers of re s o u rc e s
The inter national community, including international donor agencies,
should give specific attention to the economic and developmental needs of
discriminated groups. National governments and donor agencies should also
recognise the particular needs of these groups, and that long term
p rogrammes involving considerable investment will be re q u i red to overc o m e
the effects of persistent historical discrimination associated with economic
e x c l u s i o n .
I n t e rnational political figures, including the United Nations Secre t a ry General
and the United Nations High Commissioner for Human Rights, should
acknowledge the specific character of the discrimination which these
g roups suffer and highlight the need for action by national governments and
i n t e rnational organisations to remedy its consequences.
Recognise the responsibility of international financial institutions.
I n t e rnational financial institutions, such as the World Bank and the
I n t e rnational Monetary Fund, should ensure that their programmes and
policies and their decisions affecting particular countries do not exacerbate or
re i n f o rce patterns of racial or ethnic inequality. In addition, in setting
benchmarks and objectives, such institutions should take account of the
s t a n d a rds set by the United Nations Committee on the Elimination of Ethnic
and Racial Discrimination.
Recognise the specificity of the pro b l e m . G o v e rnments and financial
o rganisations should recognise that poverty and economic marg i n a l i s a t i o n
have specific characteristics among a group that has been victimised for a
long period of time. They should develop distinct programmes to address the
p ro b l e m .
Economic re f o rm strategies should generate a sustainable and re a l
economic environment for the groups concern e d, and should involve
access to land, markets, capital, technology, education and inform a t i o n
t e c h n o l o g y. Where groups are integrated in the mainstream economy, the
objective should be to enable members of the group to compete on equal
t e rms. A welfare-based economy or one permanently dependent on subsidy
is not an acceptable outcome.Recognise the need to invest over a long period of time. H i s t o r i c a l l y
e n t renched discrimination will not be overcome without the investment of
considerable re s o u rces over a long period of time. These re s o u rces should be
made available. Where governments cannot meet all the costs themselves,
the international community should contribute in accordance with Article 2(1)
of the International Covenant on Economic, Social and Cultural Rights.
4 5
P rovision of serv i c e s
Invest in education. Education is a vital instrument. It can transform
attitudes, and it is the foundation of skills. Education of children and adults is
essential to breaking the cycle of inequality. It is also an essential component
of economic re f o rm strategies. In some countries, literacy training, especially
for women, is important. Governments should provide schooling and should
act to ensure that all schools are competitive in terms of quality.
Eliminate discrimination and racism in the education system. In too many
countries, the education system re p roduces racial inequalities and racist
s t e reotypes. Governments and schools should develop pro g r a m m e s ,
including the introduction of teacher training materials, to ensure
that teachers do not discriminate, intentionally or unintentionally, and are
accountable when they do. Student intakes and teaching appointments
should be monitored at every level from primary to postgraduate level.
Textbooks should be reviewed to eliminate discriminatory content. Schools
should act to protect children against racial bullying.
Invest in health. Victimised communities suffer high rates of child mort a l i t y,
early mortality and illness. Investment in health is crucial to improving their
quality of life. Programmes need to address nutrition, sanitation, water supply
and quality, and environmental hazards. In some communities, childcare
p rogrammes are necessary. Qualified medical personnel and high quality
health programmes should be situated in the geographical areas where
victimised groups live and work.
I m p rove housing. Poor housing is frequently a major issue in victimised
communities. Where necessary, governments should introduce pro g r a m m e s
to improve housing. They should enforce legislation to prevent discrimination
in access to housing.
Racial and economic exclusion 2 7
4 5 The nature of states parties’ obligations has been examined in some detail in General
Comments No. 3 and No. 11 of the United Nations Committee on Economic, Social and
Cultural Rights. These General Comments have important implications in that they arg u e
that the principle of non-discrimination overrules the concept of pro g ressive realisation of
economic, social and cultural rights. In other words, the obligation against discrimination is
subject neither to pro g ressive realisation nor the availability of re s o u rc e s .2 8 Racial and economic exclusion
P rovide access to land. Especially for indigenous people, land is a cultural
and an economic re s o u rce. Governments should take steps to ensure
that indigenous communities, and other groups that rely on land for their
subsistence, have access to land and can make use of its re s o u rces no less
f reely than other users. Gover nments should assist victimised groups to
register legal claims to land they occupy, and should enforce laws that
p rotect them from illegal dispossession.
Attitudes and perc e p t i o n s
G o v e rnments and public institutions should adopt public education
p rogrammes designed to change racist and discriminatory attitudes in their
societies
Institute public education programmes. Public education is an import a n t
complement to legal sanctions. Both play a role in transforming the pre j u d i c e
that underlies racial discrimination. Programmes should be undertaken in at
least the four areas recommended in Article 7 of the International Convention
on the Elimination of All Forms of Discrimination: education, teaching, culture
and inform a t i o n / m e d i a .
Encourage public figures to speak out. Politicians, media figures, re l i g i o u s
and business leaders can influence public opinion by acknowledging the
experience of victimised groups, naming and condemning discrimination, and
p romoting programmes that seek to remedy it.
Encourage the media to be responsive. The media should be challenged to
p rovide better information about historically excluded groups, and should
avoid distorted coverage. Governments should support the strengthening of
community-based media that give voice to members of discriminated
c o m m u n i t i e s .
The United Nations. Following up the World Conference against Racism, the
United Nations should acknowledge the specific character of and the pro c e s s
underlying the entrenched victimisation detailed in this study, and should
acknowledge the need for specific actions and policies contextually designed
to remedy this victimisation.
• • •
Change will be difficult to achieve wherever a racially and economically
victimised group is very small or is not able to have political or economic
influence, and where stigma combines with economic interest to encourage
local authorities to re p ress rather than re f o rm. It is difficult to see what
leverage the Twa might have in the Great Lakes Region, or the Roma in
E a s t e rn Europe — unless they win international attention. Intern a t i o n a l
involvement in such cases is there f o re especially import a n t .In all societies, however, racial discrimination that entrenches people in
p o v e rty damages relations in the society as a whole. Even though examples
of partial success can be found, it remains the case that change is slow to
come, and deeply embedded attitudes are persistent. This said, coherent and
focused attention can make a diff e rence. Such attention must be given to
cases of the sort discussed in this re p o rt because they are among the most
resistant forms of racial discrimination that exist. If pro g ress can be made
h e re, it can be made every w h e re .
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Housing Discrimination. New York: Russell Sage Foundation, 1995.
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Services in Romania, Bulgaria, and Macedonia, New York: The Open Society
Institute, 2001.THE INTERNATIONAL COUNCIL ON HUMAN RIGHTS POLICY
The International Council on Human Rights Policy was established in Geneva in 1998 to conduct
applied research into current human rights issues. Its research is designed to be of practical
relevance to policy-makers in international and regional organisations, in governments and
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independent, international in its membership, and participatory in its approach. It is registered as
a non-profit foundation under Swiss law.
Members of the International Council
Carlos Basombrio * Director, Instituto de Defensa Legal, Lima. Peru.
Theo van Boven * Former Professor of International Law, University of Maastricht.
Netherlands.
Stanley Cohen * Professor of Sociology, London School of Economics. Britain.
Radhika Coomeraswamy UN Special Rapporteur on Violence against Women; Director,
International Centre for Ethnic Studies, Colombo. Sri Lanka.
David Fernandez Davalos, sj Rector of the Instituto Tecnologico de Estudios Superiores de
Occident (ITESA). Mexico.
Yash Ghai Sir Y K Pao Professor of Public Law, Hong Kong.
Thomas Hammarberg * Ambassador, Sweden.
Bahey El Din Hassan Director, Cairo Institute for Human Rights Studies. Egypt.
Ayesha Imam* Executive Director, Baobab for Women’s Human Rights; Co-ordinator,
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Hina Jilani * United Nations Secretary General’s Special Representative on Human
Rights Defenders; Director, AGHS Legal Aid Cell, Lahore. Pakistan.
Walter Kälin * Professor of International Law, Institute of Public Law, University of
Bern. Switzerland.
Virginia Leary Professor of Law Emeritus, University of California, Hastings College
of Law, Faculty of Law, State University of New York at Buffalo. United
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Goenawan Mohamed Poet; Former editor of Tempo Magazine; Director, Institute for the
Studies on Free Flow of Information. Indonesia.
Bacre Waly Ndiaye Lawyer; Director, Office of the UN High Commissioner for Human
Rights in New York. Senegal.
Margo Picken Associate Fellow, Centre for International Studies, London School of
Economics. Britain.
N. Barney Pityana Chairperson, South African Human Rights Commission. Commissioner,
African Commission for Human and Peoples’ Rights. South Africa.
Daniel Ravindran Founder, Asian Forum for Human Rights and Development (ForumAsia). India.
Thun Saray President, Cambodia Human Rights and Development Association.
Cambodia.
Eyad El-Sarraj Psychiatrist; Director, Gaza Community Mental Health Programme;
National Human Rights Commission, Palestine.
Dorothy Thomas Consultant, Shaler-Adams Foundation. United States.
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* Member of the Executive Board.Publications from the International Council
Racial and economic exclusion – Policy implications, ISBN 2-940259-27-5, 32pp.+8pp., 165mm x
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Ends & means: human rights approaches to armed groups, ISBN 2-940259-02-X, 100pp., 165mm
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Ends & means: human rights approaches to armed groups – Summary of findings.
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Sets out a framework for analysing the problem of armed groups and respect for human rights and
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Local perspectives: foreign aid to the justice sector, 2000, ISBN 2-940259-04-6, 132pp., 165mm x
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Local perspectives: foreign aid to the justice sector – Summary of findings.
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Examines the effectiveness of human rights assistance programmes from the perspective of
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The persistence & mutation of racism, 2000, ISBN 2-940259-09-7, 36pp.,
165mm x 220mm. Price: CHF. 15.– +p.&p. Available in English, French & Spanish.
Surveys some of the main issues that preoccupy people who suffer from racism or who study its effects.
Performance & legitimacy: national human rights institutions, 2000,
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Performance & legitimacy: national human rights institutions – Summary of Findings, 2000, 165mm
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Assesses the extent to which national human rights institutions are acquiring social legitimacy and
meeting the needs of vulnerable groups. It also examines the role of government, judicial and nongovernment institutions in making these bodies more or less effective. Field research was undertaken
in Indonesia, Mexico, Ghana, and secondary research on several other countries.
Hard cases: bringing human rights violators to justice abroad – A guide to universal jurisdiction,
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Collates and organises, in a readable way, the references to individual duties and responsibilities in
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Forthcoming
Accuracy and consistency: the media and human rights, c. January 2002.
Business wrongs & rights: human rights and the developing international legal obligations of
companies, c. Autumn 2001.
Draft reports are currently available on the council website at http://www.ichrp.org
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Racial Discrimination, Xenophobia and related
intolerance, this report examines the nature
and mechanisms of the economic factors that
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exacerbation of racial discrimination.
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that may successfully address the exclusion
that occurs when and where racism and
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India’s Runaway ‘Growth’: Distortion, Disarticulation, and Exclusion
IV. (3) Private Corporate Sector-Led Growth and Exclusion
Till the 1990s public sector expenditure gave some stimulus to demand for the production of large industry. The private corporate sector also soaked up cheap finance from State agencies, and enjoyed partial protection from imports of finished goods. Despite this comfortable environment, the underlying paucity of domestic demand – reflecting the condition of the vast majority of people – restricted the rate of industrial growth in India. And the nature of demand (i.e., for what types of products) skewed the pattern of growth, away from items of mass consumption such as cheap textiles, and toward elite consumption. This skewed, import-dependent pattern of production restricted employment creation by industry; and the sluggish growth of industrial employment in turn restricted the market for mass consumption goods.
Thus when spells of rapid growth occurred, they were distorted and self-limiting. The high industrial growth rates of the 1980s were unleashed by the relaxation of controls on industry, imports, and external borrowing. Given the Indian elite’s insatiable desire for foreign goods, and the propensity of Indian big business to operate as merchants rather than as industrialists, this relaxation was accompanied by a surge of foreign collaborations; this resulted in large imports and large trade deficits; this was in turn funded by foreign debt (not coincidentally, international banks in this period were hunting for borrowers). This culminated in the debt crisis of 1990-91. The further liberalisation post-1991 unleashed another bout of growth in the mid-1990s oriented toward elite demand; this petered out by the late 1990s, and was followed by another bout of stagnation.
It is yet to be seen how long the present bout of growth can be sustained. The proponents of the current policies argue that it is broad-based compared to earlier such bouts, that Government finances are in better shape, and that long-term trends in the international economy (in particular the growth of outsourcing) imply that growth of services exports will continue indefinitely. Let us assume there is some merit in these arguments. Regardless of whether or not growth continues, however, the pattern of industrial development taking place has some striking features which we need to note. These features help us understand whether, either now or in the future, the present trends will translate into the betterment of the people of India.
In fact the pattern of corporate sector growth, whether in industry or services, not only fails to pull up the rest of the economy; the present pattern of growth is based on exclusion, the fencing-off of the ‘growth’ sectors from the rest of the economy.

A. Bank Credit: Strengthening Dualism
Explosive credit growth – turning from production to upper-class consumption
Encouraged by Government policy, and fed by massive foreign capital inflows, bank credit grew 227 per cent between 2001-02 and 2006-07, nearly three times as fast as GDP at current prices. This explosion has played a key role in the current expansion; and nowhere is the dualism of the economy more striking.
The ‘liberalisation’ of banking marked a major shift of finance from productive sectors to consumption. The RBI Annual Report 2006-07 notes that “the share of personal loans [i.e., loans for housing, education, automobiles, consumer durables, credit card expenditures, etc] in total bank credit extended by scheduled commercial banks increased from 6.4 per cent at end-March 1990 to 23.3 per cent at end-March 2006, driven by housing as well as non-housing loans. While the share of housing credit in overall credit rose from 2.4 per cent to 12.0 per cent, that of non-housing retail credit rose from 4.0 per cent to 11.3 per cent.”
By contrast, over the same period, the share of agriculture in bank credit fell from 15.9 per cent to 11.4 per cent, and that of small scale industry plummeted from 11.5 per cent to 6.5 per cent. The sectors employing the vast majority of the workforce in production now received less bank credit than the well-heeled received for consumption.1
Booming credit-fuelled consumption triggers industrial boom
The really explosive growth in bank credit to housing and the real estate sector has taken place in the last five years. Outstanding bank credit to housing rose from Rs 894.49 billion at end-March 2004 to Rs 2.25 trillion at end-March 2007. The real estate boom has in turn spurred a boom in other sectors such as cement, steel, tiles, glass, various types of fittings (electrical, plumbing, furnishing), elevators, and consumer durables such as fans, air conditioners, and kitchen ranges. Average and peak capacity in the cement industry rose from 79 and 92 per cent in 2001-02 to 94 and 108 per cent in 2006-07, a historic high.2
Automobile manufacture (or assembly) has emerged in a few years as what the Economic Survey 2006-07 describes as “one of thekey segments of the economy” (emphasis added). The production of passenger cars (including multi-utility vehicles) has grown from 0.67 million in 2001-02 to 1.5 million in 2006-07, and two-wheelers from 4.3 million to 8.2 million. Outstanding credit for the purchase of cars and two-wheelers has risen from Rs 460.2 billion in 2002-03 to Rs 1.09 trillion in 2006-07; 89 per cent of the new cars sold in 2006-07 were bought with credit, with loans covering 79 per cent of the value of the purchase.3
As industries catering to credit-fueled demand began using more of their capacity, they began to place orders for plant and equipment; thus the growth rate of capital goods production rose from -3.4 in 2001-02 to 18.2 per cent in 2006-07.
The linkage between consumer credit and the economic boom has been confirmed by the recent slowdown in industrial growth. In an attempt to control inflation, the RBI increased interest rates in six steps during 2006-07, and, with a lag, the automobile, real estate and consumer durables sectors all slowed down, bringing down overall industrial growth. Automobile sales growth halved in the first ten months of 2007-08 over the corresponding period of the previous year.4 Consumer durables production growth fell from 11.2 per cent in April-December 2006 to -1.3 per cent in April-December 2007. Cement growth slowed from 10.3 per cent to 7.2 per cent, and finished steel from 11.4 per cent to 5.6 per cent over the same period, signalling a slowdown in the construction sector. Thus overall manufacturing growth slowed significantly from 12.2 per cent to 9.6 per cent.5
The linkage between foreign capital inflows, consumer credit to the middle and upper classes, and an industrial boom catering to that narrow market is significant. It brings out how the spectacular growth of the economy is on a narrow and unstable foundation.
Strengthening the walls between different credit markets
There has never been a unified credit market in India: credit from banks and even cooperative societies was available only to limited sectors of the economy. Despite bank nationalisation and the considerable geographical and sectoral spread of formal banking since the 1970s, most of agriculture (and the rural areas in general), small-scale/household industry, and even the urban poor continued to rely for their production needs on the informal sector (moneylenders, traders, chit funds, and the like), the size of which has been grossly underestimated in official surveys. And for consumption loans, of course, the poor had to turn to moneylenders.
However, the advent of ‘liberalisation’ in 1991 arrested and reversed even the slow increase that had been made since the 1970s in the share of the formal sector. ‘Liberalisation’ froze the division between, on the one hand, the credit-starved producers who make up the bulk of the workforce and pay usurious rates, and, on the other, a small, credit-gorged, urban elite sector. The total number of borrowal accounts nationwide rose a paltry 7.1 per cent between 1991 and 2004. Within this, small borrowal accounts plummeted; within small borrowal accounts the share of agriculture and handicrafts fell, and consumer loans soared; and the share of Dalits and Adivasis fell to half its pre-liberalisation level. The total number of rural borrowal accounts fell from 32.5 million in March 1991 to 25.4 million in March 2004.6 The number of rural bank branches fell even as that of metropolitan branches grew. In March 2007, the rural population (75 per cent of the total population) accounted for 9.9 per cent of bank deposits and 7.9 per cent of credit; whereas the metropolitan population accounted for 55.9 per cent of deposits and 66.1 per cent of credit.7 Within banks’ agricultural lending there has been a massive shift away from small borrowers and small cultivators, to large borrowers and large cultivators.8 Thus, in the name of ‘freeing’ credit of ‘financial repression’, the vast mass of borrowers (who are also the vast mass of producers) have been thrown in the dungeon of usury. Usury is a parasitic extraction which prospers from the weakness of the borrower; it prevents productive investment and the growth of productive forces. Far from attempting to unify the credit market, the authorities have now made clear that formal banking services will not be extended to the vast majority: an official RBI committee has now charted out methods whereby instead rural moneylenders can be provided funds by the banks, and “incentivised” to reach credit to the financially excluded.9 The rulers have also been trumpeting microcredit as the answer to financial exclusion. But this sector meets only a trivial fraction of credit requirements,10 and is irrelevant for productive purposes – it largely goes toward consumption loans, current capital for petty retail, and the repayment of informal sector loans (correspondingly, borrowers frequently take informal sector loans in order to repay microcredit loans). In the peasantry’s situation of isolation and credit-starvation, microfinance is able to charge high rates of interest and recover loans through extra-economic coercion. These firms claim that borrowers are more concerned about the availability of funds than the rate of interest, as evidenced by their paying high rates to usurers; but it is far-fetched to imagine that the economic activities of small borrowers yield returns high enough to justify such rates. That they pay them nevertheless is a sign of their helplessness. The microcredit sector’s handsome returns have now attracted investment by foreign private equity firms – a happy marriage of international speculative capital and domestic usury.
The banking system has operated as a channel for the outflow of such meagre savings as accumulate in the rural areas. The ratio of credit disbursed by banks to deposits received (the C/D ratio) fell sharply in the rural areas between 1991 and 2004, and rose sharply in the metropolitan areas. (The C/D ratio also fell or stayed the same for relatively backward regions – the northeastern, eastern and central regions, while it has improved for the western region.) So great has been the urban credit explosion that within a few years the banks have found the urban sector ‘saturated’, and have been resorting to ‘sub-prime’ lending (ensuring repayment through thuggery).
As striking as the exclusion of peasant agriculture from formal credit has been the exclusion of small scale industry, a major employer. Its share of bank credit has fallen to 6.5 per cent – less than half the level of 1972, which was before the setting of targets for priority sector lending. According to one columnist, “So underserved is this segment, and so acute is its hunger for credit, that at least one finance company is able to charge annual interest rates of 20 per cent or more while restricting the loan amount to a third of the value of the collateral.” When loans extend to only a third of the value of the small collateral, one can imagine the restriction on growth of assets of this sector11 Micro-enterprises account for 99 per cent of small scale industries and the overwhelming bulk of employment in the sector, but, as revealed by a recent report of the National Commission for Enterprises in the Unorganised Sector (NCEUS), they are completely shut out of bank credit.According to Rakesh Mohan, deputy governor of the RBI, banks’ cost of lendable funds in 2005 was 7.5-8.5 per cent, but “The interest rates vary from 3-4 per cent on the lower side to 24-25 per cent on the higher side.”12Who was getting funds at below cost? RBI governor Y.V. Reddy stated bluntly that banks were underpricing the risk of loans to large borrowers and overcharging small businessmen and farmers.13 Little has changed since then: Almost 79 per cent of the lending by scheduled commercial banks was at below the benchmark prime lending rate (BPLR) at end-March 2007.14 An official committee remarks that “small and micro enterprises get credit above Rs 2 lakh [Rs 200,000] at a rate 2 per cent higher than the PLR. In addition, there are several service charges, which further escalate the cost of credit. The result is that large enterprises receive credit at almost half the rate levied for the unorganised and small enterprises...”, i.e., 6 to 7 per cent as compared to 13 to 16 per cent.15 In effect, the capital-starved sectors of the economy have been subsidising the sectors gorged with capital.16
The deposits and outstanding credit of scheduled commercial banks (SCBs) by region and state also reveal extreme regional inequality, as can be seen in Table 1. The C/D ratios are abysmally low for the northeastern, central and eastern regions, which account for half the country’s population. Maharashtra and Tamil Nadu, on the other hand, have C/D ratios of over 100 per cent. However, even this does not bring out the extent of inequality; as the deposits are also higher in the better-off states, their share of total credit is even greater.17 Thus credit/person in the northeastern, central and eastern regions is between one-fourth and one-third of the all-India average; whereas in the western region it is more than two and a half times the all-India average. One should also remember that even within the western region it is only pockets that are flooded with credit: for example, in Maharashtra virtually all bank credit is concentrated in Mumbai-Thane and Pune.

Table 1: Disparity in Credit-Deposit Ratios and Credit/Person of Scheduled Commercial Banks across Different Regions, 2006

	Credit-Deposit Ratio (%)	Credit as ratio of all-India credit per person	% of Population
Northeast Region	40.7	0.24	3.7
Central Region	44.2	0.30	24.9
Eastern Region	49.2	0.35	22.1
Northern Region	64.6	1.53	13.7
Southern Region	84.4	1.19	21.8
Western Region	92.0	2.55	14.5
All India	72.4	1	100
— Source: Calculated from RBI, Basic Statistical Returns. Population is of 2001 Census.

While the regional chauvinist leader Raj Thackeray has whipped up riots in Maharashtra demanding that migrants from U.P. and Bihar leave the state, he has not raised any objection to capital from U.P. and Bihar migrating to Maharashtra. The difference between bank deposits and bank credit in U.P. is over Rs 900 billion, and in Bihar is almost Rs 320 billion; whereas in Maharashtra, as we noted, credit is higher than deposits. The migrants from U.P. and Bihar are merely following the capital that has flowed out of their states; were there sufficient investment in their own states, they would surely stay there.
Thus the banking system is working to reproduce and strengthen all the dualities we named earlier – between agriculture and non-agriculture, rural and urban areas, backward and relatively developed regions, small and large industry, dominant and oppressed castes, etc.

B. Enclave Development
The ‘New Economy’
The information technology (IT) and information-technology enabled services (ITES) sectors have been at the forefront of growth in the last decade. One of India’s principal advantages in this field is a colonial legacy: the dominance of English in secondary and higher education, as well as in various important aspects of society and the economy. The educational system that once produced clerks for the Raj now excels in producing a cheap skilled labour force for multinational corporations. Of course, this means that the historical disparities in Indian society get reinforced by the success of these industries: one survey-based study finds that “one of the reasons for the IT industry’s success is that it has been able to tap the existing cultural capital of the urban middle classes (which consist primarily of high and middle castes) – including their educational attainments, knowledge of English, and some degree of westernised social orientation and habits. The IT workforce is drawn mainly from this section of society, and by providing new and lucrative employment opportunities it is in turn contributing to the reproduction and consolidation of middle class/upper caste domination.18 Another study calculates that “somewhere between 4-7 per cent of all Indians have the kinds of educated parents that characterise successful new entrants to the software industry”.19
By 2006-07 the IT/ITES sector (including engineering services and R & D and software products) accounted for 4.3 per cent of GDP, of which four-fifths was from exports. Yet it accounted for about 0.3 per cent of the country’s employment. Some reports project employment in this sector to double by 2010; in that case it will account for something like 0.7 per cent of total employment at that point. Whereas it will account for more than 6.5 per cent of the country’s GDP in 2010: In other words the IT/ITES share in GDP will be nine times its share in the workforce – an enclave within the Indian economy.
While IT/ITES employees save a much larger share of their incomes than ordinary workers, their expenditures are nevertheless sizeable and generate some further employment. But their spending patterns are very different from those of ordinary workers, who spend their wages on items such as foodgrains, textiles, footwear, and cheap industrial goods. By contrast, the growth of IT/ITES incomes will continue to boost demand for urban housing, automobiles, organised retail, hotels, air travel, mobile telephony, entertainment, foreign holidays, credit cards, banking services, insurance, and share market-related firms. All this elite expenditure will no doubt result in some indirect job creation in various activities such as domestic help, security, construction of residential accommodation/commercial space/roads, organised retail, hotels, transport, financial services, and so on; and spending by these sectors in turn will generate some further jobs. Nevertheless, in comparison with the same rupee expenditure on a wage good such as textiles which has extensive backward linkages, a large proportion of elite expenditure leaks abroad, and at any rate the additional domestic employment generated is very low. This helps explain why genuine employment growth has been so slow despite high GDP growth.
The operations of the firms themselves have strong external linkages, but weak linkages with the domestic economy: they purchase few inputs or capital goods from the domestic economy, and three-fourths of their output is exported. Their most important expenditure in the domestic market is on real estate. The effects of this can be seen in the extraordinary real estate boom. While this has boosted demand for steel, cement, and construction, most of all it has unleashed huge speculation in real estate. Hitherto little-known real estate sharks have become among the richest tycoons in the country: of the 54 Indian dollar billionaires listed in 2007 by the U.S. magazine Forbes, 7 are real estate developers, and one – Kushal Pal Singh, unknown a decade ago – is the fourth richest. More importantly, huge foreign funds have flowed to the real estate sector, directly and indirectly. Much of the real estate owned by these tycoons – and indeed directly by IT firms as well – has been acquired at relatively low prices from peasants in the vicinity of major cities.
Even if we assume that each IT/ITES job generates an additional 1.5 jobs in other sectors,20 given that the sector itself will continue to employ less than 1 per cent of the workforce for a long time to come, its impact on the overall employment scene in India will be restricted (while its impact on the job market of college-educated youth may be very large). Moreover, when seen as part of broader processes in the economy of which it is a part, the net addition to employment is less clear. For example, the acquisition of vast tracts of land for the IT/ITES firms and for housing their employees will reduce agricultural employment. The IT/ITES sector has also demanded, with increasing assertiveness, that urban planning be fashioned according to its interests, as opposed to the interests of the mass of ordinary urban citizens. With the peculiar, isolated boom in the IT sector, the economy as a whole becomes moredisarticulated: the organic links between different productive sectors of the domestic economy are broken in the course of strengthening external links. For example, by one estimate the IT sector will pick up 80-85 per cent of India’s “employable” engineers, and nearly 60 per cent of its “IT-employable” graduates;21 that is, the best academic performers will be absorbed by an industry that largely caters to foreign demand for software and services, much of it “cyber-coolie” work. This diverts skilled workforce (much of it educated at a public subsidy) away from the development of all-round technological capability in India. In the event of a major disruption in outsourcing, the hordes of IT employees will be of little use for the specific requirements of India’sdevelopment. The employment of call centre workers is even more of a dead-end in skills, useless to the domestic economy. It is true that several Indian firms have displayed high-tech abilities, and that the cream of Indian engineers are considered to be among the world’s best. However, this fact merely highlights the missing links in the chain of technological development. For example, the Government made some efforts in the 1980s to develop telecom technology indigenously, but these were later abandoned and disbanded. Now the entire explosion in telecommunications in India since the 1990s has merely yielded a massive harvest for foreign producers of telecommunications equipment. In just the period 2005-08 the estimated capital expenditure of telecom service providers is put at Rs 1.5 trillion,22 for which the equipment overwhelmingly imported.23 Further, India produced 31 million mobile handsets in 2006, which is estimated to rise by 68 per cent in 2007; the components are very largely imported.24 An interesting new pattern is of sophisticated research and development (R & D) being carried out in India on contract for multinational firms, for example in telecom and semiconductors. Several multinational telecom giants such as Alcatel and Cisco have established R & D facilities in India to tap the excellent and cheap engineering talent available in India.
This is not to suggest that the growth of exchange between the Indian economy and the world economy as such generates dependence and disarticulation (rupturing of organic linkages) in the former; its effect depends on the character of relations within the Indian economy. We have seen in the earlier chapter how the Indian ruling classes have developed historically through a process of disarticulation of the domestic economy, parasitic drain from the productive sectors, and dependence on imperialism. The mercantile activities of big business (in the real estate and financial sectors, marketing of imported goods, and export of cheap labour services) continue to occupy a prominent place in their overall operations, often predominating over their industrial activities. Parasitic classes continue to rule agriculture. Within this framework the growth of exchange with the world economy exacerbates all these regressive features.
Enclave development as official policy: the SEZs
An even more striking manifestation of enclave development is the Special Economic Zones. This is enclave development as officialpolicy. The process of enclave development is not accidental; it is the inevitable consequence of an attempt to generate rapid growth on the base of a narrow market. The rulers’ argument is as follows: India cannot grow fast without foreign investment; foreign investment will not come to India as long as it lacks ‘world-class’ infrastructure; it is impossible to provide such infrastructure throughout the country in the near future; hence private capital should be invited to develop such infrastructure first in pockets of the country, insulated from the conditions around; as reward for this, both developers of SEZs and the units operating in them should obtain generous tax concessions.
Given that SEZs are to be insulated from the conditions of India, infrastructural investment for their needs will have little or no benefit for the rest of the economy. H.W. Singer’s remarks of six decades ago still hold true: “the productive facilities for export from underdeveloped countries, which were so largely a result of foreign investment, never became a part of the internal economic structure of those underdeveloped countries themselves, except in the purely geographical and physical sense.”25
The profits of SEZ developers will be particularly attractive since the zones include elite real estate development such as hotels, malls, entertainment, and the like (the present rules stipulate a minimum of 25 per cent of the SEZ area be used for industrial processing,leaving the bulk of the area for real estate development). The most important inducement to invest is that both industrial investors and real estate developers will be given massive tax breaks – in the apt language of an earlier draft of the Act, the SEZs will be considered “foreign territory” for tax purposes. The finance ministry estimates that, for a total investment of Rs 3.6 trillion in the SEZs, the loss in taxes to the exchequer will be Rs 1.74 trillion. A large share of the SEZs are to be of the IT industry (indeed, two-thirds of the SEZs notified so far), which has already been growing rapidly without SEZs: it is obvious that these IT SEZs will not attract investment beyond what was coming anyway, but will merely divert investment to a tax-holiday area. The reason is simply that tax concessions for existing IT firms are due to expire in 2009; by this shift they will extend another 10 years. (The present minister of state for commerce has candidly termed this a “bypass surgery” for the relevant provisions of the Income Tax Act.26) While this diversion is more blatant in the case of the IT SEZs, it is likely to be true of most SEZ investment.
To the extent SEZ investment is merely diverted from other areas, it cannot create net employment; and given that in many cases fertile agricultural lands are being acquired for the purpose, the net employment generated would be negative. The government is putting out contradictory and dubious estimates of the employment that would be generated. The RBI Annual Report 2005-06 says that eventually 0.5 million jobs would be generated with an investment of Rs 2 million per job; the Economic Survey 2006-07 says that by December 2009 0.89 million jobs would be created at Rs 660,000 investment per job (and if all 237 SEZs become operational 4 million jobs would be created at Rs 750,000 investment per job).
Given that fixed investment per employee in the organised manufacturing sector (which encompasses all manufacturing firms with 10 or more workers using power, and hence includes firms with very low capital-intensity) was Rs 600,000 in 2003-04, these claims of employment creation in SEZs appear extremely far-fetched. The entire surge in corporate sector investment over the past decade failed to create any jobs, since it was so capital-intensive. The proposal by the Salim Group of Indonesia for an SEZ in West Bengal (including a technology park, a knowledge park, a hotel complex, a health park and a golf course) claimed that 30,000 jobs would be created with an investment of Rs 440 billion, or nearly Rs 15 million investment per job. As we saw above, two-thirds of the SEZs are IT SEZs, which would have a pattern of investment similar to the Salim Group proposal. The Posco SEZ in Orissa is projected to create 13,000 jobs with Rs 510 billion of investment, or nearly Rs 40 million per job. One could generously guess that one job might be created per Rs 10 million investment in the SEZs; in which case, Rs 3.6 trillion of investment in SEZs might create only 0.36 million jobs. This is negligible by any measure – whether as a percentage of total employment (385-457 million by different measures in 2004-05) or of the addition to the labour force over the next few years (45-50 million over the next five years). At the same time, as we mentioned earlier, the finance ministry estimated that taxes lost as a result of SEZ exemptions would be Rs 1.74 trillion. Even a portion of this sum, if spent on employment-generation schemes or loaned to small producers, could generate vastly greater employment than the SEZs.
A recent study found that workers in existing SEZs work 5.3 per cent more hours than workers in non-SEZ areas, at hourly wages which are 34 per cent lower.27 Indeed, to the extent SEZs are export-oriented, wages and labour conditions in SEZs must be depressed, since the aim is to compete with SEZs of other countries offering labour on equally depressed terms. To facilitate this, the SEZ Act permits the state governments to delegate powers under the Industrial Disputes Act to the Development Commissioner of the SEZ, and to declare SEZs as ‘public utility services’ (this would make strikes illegal). Moreover, the Centre’s model SEZ Act for the state governments contains a list of exemption clauses in labour laws, including the Minimum Wages Act and the Contract Labour Regulation and Abolition Act. The functions of a Grievance Redressal Officer in an SEZ may be performed by the Development Commissioner – that is, there is no separate labour machinery (thus workers employed by the SEZ Authority would appear before the person against whom they would be lodging their grievance).
The SEZ Authority, which governs the zone, is chaired by the Development Commissioner, and includes three officers of the Central Government and two entrepreneurs or their nominees; there is no provision for representatives of workers (even if such provision were made, of course, we know how easy it is to select pliable ‘representatives’). The powers of various wings of the State machinery – police, judiciary, municipal – will be concentrated in the hands of the Developer of the SEZ and the Development Commissioner. Evidently, the SEZs are not only economic enclaves but political enclaves as well, to be run as so many princely states, with no pretensions to democracy.
Under the banner of ‘infrastructure’: Fencing off ‘development’
SEZs are also only one example of the much broader process of enclave development. It has become part of official policy in a number of sectors to fence off investment from the rest of the economy. In the transport sector, the policy is to direct investment to serve the developed regions and the elite. For example, the Railways plan to focus on building high-speed rail corridors between metropolises. Land along these corridors is slated for commercial development (supposedly for industry, but we have seen how the SEZs have been used as a cover for real estate activity); just the initial land acquisition for the first corridor would be 8,800 hectares.
Huge funds have been spent on the National Highway Development Project, most of all on the Golden Quadrilateral connecting the major metropolises, facilitating a massive expansion of automobile travel and other road transport between these points. This is India’s largest infrastructure project since 1947; by comparison the expenditure on rural roads is paltry and behind schedule, preventing the development of local markets. Similarly, the hundreds of flyovers which are being constructed across the metropolises at gargantuan cost, may benefit automobile owners, automobile manufacturers, and construction firms, but they are generally out-of-bounds for public transport and useless to the inhabitants of poorer, congested areas. Tellingly, the Bangalore-Mysore Infrastructure Corridor Project expressway is elevated and literally fenced off from the surrounding rural areas, in order to prevent villagers from crossing them and holding up inter-city traffic. The transport sector thus continues along the pattern of the development of railways under the Raj. And further in line with the same pattern, the highway, flyover, metro and railway projects offer huge bonanzas to foreign consultancy, engineering and equipment firms. The dedicated freight corridor between Mumbai, Delhi and Kolkata is to come up on fresh rail infrastructure, naturally, with Japanese aid tied to purchases from Japanese firms. The Japanese estimate of the cost is twice that of the Railway Ministry. The NHDP has been partly financed with loans from the World Bank, the Asian Development Bank and the Japan Bank for International Cooperation, and foreign engineering firms are major participants in it. The first line of the Mumbai Metro, to be built by a consortium of Reliance Energy and two foreign firms, is to be built on what is called ‘standard gauge’. Since broad gauge, on which the Indian Railways runs, was rejected for the Mumbai Metro, all equipment and spares for it now and in the future will have to be imported.
The corporate sector, sundry official committees and the media have long been been building up a drum-beat about the need for ‘infrastructure’. The Prime Minister has appealed to foreign investors to fill a purported $300 billion gap in infrastructure; without it, we are told, growth itself is threatened, and since the need for such ‘growth’ is beyond question, there is no discussion about what the infrastructure is for. If there were, it might reveal the distorted pattern of development associated with this infrastructure. For example, the expansion of airports, to provide for a staggering 25-30 per cent annual growth in air travel, is taken as indispensable; the Jawaharlal Nehru National Urban Renewal Mission has shelled out additional public funds to connect the privatised Mumbai airport to the express highway with a wide flyover; and those whose homes lie in the way must console themselves with having sacrificed their lands for national development. In fact, however, the entire infrastructural project is in the service of luxury consumption.
‘Infrastructure’ cannot be viewed in the abstract. It can serve either the productive sphere or purely mercantile activities; its significance depends on the economic environment in which it operates. Paul Baran cogently said that the effect of creation of infrastructural facilities
would still remain nil (or negative) as long as they constitute alien bodies in a socio-economic structure into which they have been artificially injected. For it is not railways, roads, and power stations that give rise to industrial capitalism: it is the emergence of industrial capitalism that leads to the building of railways, to the construction of roads, and to the establishment of power stations. The identical sources of external economies, if appearing in a country going through the mercantile phase of capitalism, will provide, if anything, ‘external economies’ to merchant capital. Thus the modern banks established by the British during the second half of the nineteenth century in India, in Egypt, in Latin America, and elsewhere in the underdeveloped world became not fountains of industrial credit but large-scale clearing-houses of mercantile finance vying in their interest charges with the local usurers. In the same way, the harbors and cities that sprang up in many underdeveloped countries in connection with their briskly expanding exports did not turn into centers of industrial activity but snowballed into vast market places providing the necessary ‘living space’ to wealthy compradors and crowded by a motley popultion of petty traders, agents, and commissionmen. Nor did the railways, trunk roads, and canals built for the purpose of foreign enterprise evolve into pulsing arteries of productive activities; they merely accelerated the disintegration of the peasant economy and provided additional means for a more intensive and more thorough mercantile exploitation of the rural interiors.28

C. Capture of Natural Resources
The land grab by SEZs is only one example, albeit a major one, of a much broader process under way of seizure of land and other natural resources by the private corporate sector and foreign investors. State governments are vying with one another for such predatory ‘investment’, offering large subsidies in the process (for example, the West Bengal government’s massive subsidising of Singur land for the Tatas’ car factory). State policy has embraced the private capture of natural resources, both directly in the form of inviting investment in extractive industries, and indirectly by permitting industrial projects based on captive mines. The public sector Oil and Natural Gas Corporation (ONGC) is the corporation with the highest profits in India, thus it would have had easy access to funds for a major exploration drive. However, throughout the 1990s ONGC failed to carry out major investments in deep-sea exploration (clearly on direction from the Government, which has always closely controlled its functioning). Thereafter successive governments have carried out seven rounds of the New Exploration Licensing Policy (NELP), under which foreign and Indian corporations, including the ONGC, bid for various Indian fields. Among the major gainers of this privatisation have been Reliance and Cairn Energy. Meanwhile ONGC is making large investments abroad (the largest being its $2.7 billion investment in the Sakhalin oilfield in Russia).
Perhaps the largest foreign direct investments (FDI) in India are to be made by steel firms like Posco and Arcelor Mittal aiming to capture India’s rich iron ore reserves, which are considered to be of high quality. According to various estimates cited in the press, the provision of captive iron ore mines by the Orissa government will benefit Posco by Rs 540 billion, Rs 960 billion or Rs 2 trillion over the life of the project (this being various estimates difference between the market cost of ore and the cost of mining it over the life of the project).29 The Orissa government is also acquiring 6,000 acres for the project, including for the captive port being set up by Posco. Although some 10,000 cultivators earn their livelihood on part of the land to be acquired, growing betel, much of the land is recorded as wasteland or forest land, belonging to the State; hence the government claims that only 471 families will be displaced, since only 471 have title to their land.30
The Central Government has done its best to accelerate the opening up of mining to foreign investment. The Anwarul Hoda Committee set up by the Planning Commission is based on the tenet that increasing investment in mining and extraction of minerals isas such beneficial, and must be accelerated. It has recommended eliminating the requirement of public hearings in the case of mines smaller than 50 hectares. It calls for an increase in the upper limit for a single mine lease from 10 sq km to 50-100 sq km – implying massive displacements. If, on the basis of a permission to survey, explore, or prospect, a firm finds minerals, it should be granted a lease to mine without a detailed environmental impact assessment. Similarly, lease renewals should be virtually automatic. It further recommends that the Centre have the right to allot a mining lease to any firm in case the state government fails to decide within the stipulated period.
Interestingly, the chief ministers of Orissa, Chhattisgarh, Jharkhand, and Rajasthan, the very persons who have been promoting the great handover of natural resources, have now voiced certain reservations in a memorandum to the Prime Minister in December 2007. This is of course a hypocritical exercise, and their motives are limited to ensuring that they too have a say in the decision-making process (and thus a share of the cream); nevertheless their comments are revealing. First, they demand that value be added to raw materials in the state in which they are extracted (the Hoda Committee has recommended that there should be no compulsory value-addition within the mining state, as it would deter investment in mining). Further, they demand that the states should be adequately compensated for the extraction of the minerals through a royalty based on value, the export tax on these minerals should be credited to the states, and five per cent of the profits from mining be set aside for social and economic development. Finally, they urge that the management and development of certain minerals of national importance continue to be reserved for state public sector units. They warn that the present trend “If followed to its logical conclusion... may result in a few multinational mining companies acquiring control over the vast mineral resources of the country that are essentially required for the domestic manufacturing industry.” Indeed this is the typical pattern of extractive investment in a third world country. Jamshedpur, run by the Tatas as a model town, is often cited as evidence that mining brings ‘development’ to a region; but what is striking is that a century of Jamshedpur’s existence has not brought development to the broader region around it, which is as backward as ever. In the memorandum’s telling phrase, “It is an irony that the mineral-rich states are the poorest states of the country.”31
This precisely echoes the titles of two recent reports brought out by NGOs. The Centre for Science and Environment’s Rich Lands, Poor People – Is Sustainable Mining Possible? reports that of the persons displaced between 1950 and 1991 for mining, not even 25 per cent were rehabilitated; of the displaced, 55 per cent were tribals. ActionAid’s Resource Rich Tribal Poor reports that in four states – Andhra Pradesh, Chhattisgarh, Jharkhand, and Orissa, 7.9 million hectares have over the years been acquired under the colonial (1894) Land Acquisition Act, displacing a population of around 10 million, more than two-thirds receiving nominal or no compensation, let alone rehabilitation. As for the claim that mining and mineral-based industries would create more employment, the CSE report brings out that the workforce in both sectors has actually declined by 20 per cent in recent years.
On the other hand, the CSE report describes the devastation of the environment by the existing pattern of mining – the clearing of forests, the failure to dispose of waste properly, the pollution of water sources. Between 1980 and 1997, permissions for clearing forests for mining were granted at an annual average of 20 projects and 2,030 hectares; between 1998 and 2005, the annual rate went up to 125 projects and 8,650 hectares. The Indian Bureau of Mines inspects 80-90 per cent of officially operating mines annually; it finds about 50 per cent of them violating environmental laws; it prosecutes about 10 per cent of the violators; and less than one per cent of the violators have operations suspended.
Whether for mining, for locating large industry, or simply for real estate, these giant grabs of natural wealth such as land, forest and minerals generally meet resistance from those whose land is to be acquired. This resistance is especially fierce because those whose land is to be acquired know how scant are the prospects for making a living in any other sector, whereas they are able to obtain at least subsistence from the land. Moreover, with displacement, their social networks are broken; without these networks, they are left even more defenceless against exploitation by sundry predators. Thus the acquisition of land, even where seemingly sizeable compensation is offered, requires coercion. Even if the State does not acquire lands under the Land Acquisition Act, and leaves it to private parties to carry out, the situation is grim for those facing acquisition: in the rural areas and parliamentary life of India it is easy enough to find various middlemen and toughs who divide, cajole, and finally terrorise villagers into parting with their land. Thus the last few years have been marked by violent clashes between villagers and the State, or the armed thugs of private firms, at a number of places: Kalinga Nagar, Kashipur, the Posco project, Singur, Nandigram, and various proposed project sites in Bastar have all witnessed serious clashes, some even massacres. It is even argued that the State-sponsored private militia in Chhattisgarh, the Salwa Judum, was organised in order to overcome opposition to a large number of private corporate mining projects to come up in the state.32
Aside from the fact that the effects of these resource-captures are frequently devastating to people’s agricultural employment, their nutrition, and the environment, even the supposed benefits to the broader economy are transient. The natural resources being extracted are limited and irreplaceable; once they are exhausted, the investor can move on, leaving neither lasting assets nor employment, but only an environmental mess for the people to suffer.
The calculation of GDP, of course, does not take into of these aspects into account. Since the subsistence activities of the villagers, especially if they are tribals, are at such a low level that they do not contribute much to GDP, and the profits and salaries of the corporate sector are high by comparison, the elimination of the tribals’ subsistence and the seizure of natural wealth by the corporate sector shows up as an increase in GDP.
This giant capture of land and natural resources by the corporate sector is superficially similar to the ‘primitive (or primary) accumulation’ of capital which served as a necessary stage of capitalist development in Europe. Indeed it resembles that stage in its brutality and venality. But whereas the capital thus accumulated in the original countries of capitalist development was deployed in manufacturing activity that absorbed the bulk of the dispossessed rural labour force, such absorption is very restricted here. Nor is agricultural land being concentrated in the hands of agricultural capitalists farming with improved methods and supplying the market of the new factory labourers. Thus the country suffers the pains of primitive accumulation without its progressive effects.

D. ‘Development’ as Exclusion
The notion that growth of manufacturing or services industries is per se desirable is a form of fetishism. We need to ask questions such as “Does it create net employment (i.e., does it create more jobs than it destroys)?”, “Does it meet mass consumption requirements (either directly or by developing the capacity to meet these requirements)?”, “Does it squander the economic surplus on luxuries? Does it divert resources from more pressing priorities?” “Is it environmentally sustainable? Does it exhaust natural resources?”, “Does it uproot people?”, and so on. In fact one can cite several industries which, not as an avoidable by-product of their development, but as an essential part of it, harm the masses of people, and benefit only a small class. True, the so-called ‘value added’ by these industries contributes to the GDP; but this fact merely underlines the irrationality of using GDP as a measure of development. Let us take a few examples of these industries.
Healthcare
(i) The value added of certain industries actually grows with the exclusion of people from the market. The private sector in health has surged in the period of ‘liberalisation’. A study by the international consultancy firm Ernst and Young and FICCI estimates private hospitals’ revenue at Rs 620 billion in 2005-06, and projects it to exceed Rs 1.3 trillion in 2012.33 A CII-McKinsey study puts current revenues from the entire healthcare sector at 5.2 per cent of GDP, and projects that revenues could reach 6.5-7.2 per cent of GDP by 2012. To bring this about, it wants Rs 1-1.4 trillion to be invested in hospitals and medical personnel (particularly as the share of inpatient care is projected to rise to almost half of total revenues). Of this investment, 80 per cent is to come from the private sector. The study expects that the private sector’s current share of revenues, about 80 per cent, would rise with the rich and middle class buying health insurance. Coupled with the expected growth of the pharmaceutical sector, it projects that the total healthcare market in the country could reach as much as 8.5 per cent of GDP.34
One major opportunity for the corporate sector is the outsourcing of healthcare by the developed world: An earlier CII-McKinsey study projected that medical tourism (whereby foreign citizens visit India for treatment at corporate hospitals) could account for Rs 100 billion by 2012. The trend is already pronounced, with 150,000 medical tourists visiting India in 2004, a figure which is growing at an annual rate of 15 per cent.35
However, medical tourism and the corporate healthcare industry divert scarce domestic medical manpower and resources from the requirements of the vast majority of people. This in a situation where the dominance of the private sector has already made healthcare unbearably expensive for the vast majority. In India 80 per cent of expenditure on health is out-of-pocket spending by patients; public health spending is among the world’s lowest as a proportion of GDP (0.9 per cent, falling from 1.3 per cent in 1991). Remarkably, the share of the health sector in India’s GDP, at 5-6 per cent, is double that of comparable countries such as China, Sri Lanka, and Malaysia (2.4-3 per cent); yet the latter countries have much better health indicators than India.36 Internationally, countries with a smaller public sector in health wind up devoting a larger share of GDP to healthcare than comparable countries, and yet experience worse health indicators; the classic case among developed countries is the United States. In a sense, then, the very growth of the private sector in healthcare both leads to the growth of the sector’s share in GDP and the worsening health of the people.
The trend toward corporate healthcare in India would accelerate the shift of medical resources to the private sector and further prevent the poor from getting medical care. (Further, salaries of public sector medical staff would have to be raised in order to prevent them from leaving for the private sector; this would reduce the amount left for other heads of expenditure.) Even before the large-scale entry of the private corporate sector, the overall direction of neo-liberal policies has led to increasing exclusion of the poor from healthcare: NSS data show the share of persons “not taking treatment due to financial reasons” in the rural areas rising from 15 per cent in 1986-87 to 25 per cent in 1995-96, and from 10 per cent to 20 per cent in the urban areas over the same period.37 Since 1991, and particularly since the mid-1990s, there has been a steep growth in the share of “medical care and health services” in total consumption expenditure38; yet in the same period, the rates of decline in infant mortality ratio and under-five mortality have stagnated or slowed.39
The case of certain other services such as education, is similar: their value added (their contribution to GDP) is measured by the wages and profit of the institutions in the sector. Thus the growth of the private sector at the cost of the public sector is reflected in a rise in the GDP share of that service – even as it may mean the worsening of conditions for the majority of people.
Real estate
(ii) The development of the urban real estate industry requires the eviction (‘re-location’) of slumdwellers, the closure of manufacturing firms, and the eviction of hawkers from the areas to be gentrified or beautified. All these measures affect the employment and income of vast numbers.
Let us take the case of Mumbai. Here well over a million slumdwellers have been or are being ‘re-located’ in various drives (over 400,000 lost their homes in the brutal demolitions of 2004-05 alone, and over 450,000 are to be re-located for the expansion of the airport). A large number of small industries of Dharavi, perhaps the world’s largest slum, will not survive the impending ‘re-development’ plan, as they will be allotted a space too small for production activities.
Of the city’s 300,000 hawkers, it is proposed to provide only 17,000 licenses to hawk in 196 hawker zones. These zones must be further than 100 metres from religious and educational institutions and hospitals, and 150 metres from railway stations; nor are they to be in residential areas or on footbridges. At any rate, the license is to be valid for only one year. Whether or not this can be implemented, the harassment of hawkers will affect their employment and income.
Hundred of thousands of industrial workers have lost their jobs in the liberalisation (ie. post-1991) period in order for the land of their factories to be converted into real estate. To take the case of Mumbai’s textile mill lands alone, it was reported in 2005 that 585 acres (234 hectares) of mill land in central Mumbai was available for redevelopment; none of this will go to creating industrial employment. Since many of these lands were given on lease by the British Raj on the specific terms that they be used for textile mills, it would have been particularly straightforward for the Government to have taken over these lands, rather than treat them as the property of the millowners; it goes without saying that it did not do so. The development of urban real estate also increasingly spreads beyond the earlier city limits and encroaches on agricultural/fishers’ land, further destroying employment.
Even as the cities and their immediate vicinity witness large-scale conversion of industrial land to malls, luxury flats, hotels, and the like, state governments argue that industrialisation requires the large-scale acquisition of agricultural land. Perhaps the most vociferous exponent of this ‘industrialisation-needs-agricultural-land’ theory is the Government of West Bengal – the same government which spent two decades watching with with folded hands as factory after factory in the urban areas of West Bengal stopped industrial production and locked its workers out.
Retail industry
(iii) The development of the organised retail industry eats into the market of the unorganised retail sector, which is already precarious. It is estimated that 35 to 40 million people are employed in petty retail; encroachment of large retail firms on this sector will thus have a very large impact on employment. A recent Government-commissioned study by ICRIER, while endorsing big retail, reported that the sales of 50 per cent of small retailers surveyed, and 61 per cent of all retailers, had suffered as a result of the entry of big retail firms. According to Technopak, a consultancy firm, the share of organised retail firms in India’s total retail market will grow from a few percentage points at present to 20 per cent in five years.
It is true that the workforce in the retail sector is unproductively employed; vast numbers of the unemployed take to the retail sector as a ‘refuge’ employment when all else fails. But no one has claimed that the share of the retail sector in GDP – which is the same as the sum of wages and profit of the sector – will decline with the entry of large firms; rather, it is projected to grow (Assocham claims that it would grow from about 8-10 per cent of GDP at present to 22 per cent by 201040).
In that case, the entry of organised retail firms in the present context merely serves to concentrate retailing margins in fewer hands, and renders small retailers unemployed without any alternative.
Environmentally damaging industries
(iv) What we mentioned earlier in the case of mining holds true more generally, namely, that GDP by its nature cannot reflect environmental costs (which among other things are also costs to the well-being of people). This is particularly strikingly illustrated by certain industries which in effect import destruction of the environment for the people at large, for a fee earned by the local industrialists. There are firms with directly import various types of harmful waste for dumping; others import ships or equipment (such as computers) to be scrapped, bearing harmful substances. A 2002 report of the Basel Action Network estimated that 50 to 80 per cent of the electronics waste collected for recycling in the U.S. was being disassembled and recycled under unregulated and unhealthy conditions in India, Pakistan, China and other developing countries. A 2005 report by Greenpeace, Recycling of Electronics Wastes in China and India found such recycling activities contaminated both the workplace and the surrounding environment, but there was virtually no Government regulation of these activities.
Half the world’s ocean-going ships end their sailing lives in India, most in Alang of Gujarat. Another Greenpeace study of 2005, End of Life Ships: The Human Cost of Breaking Ships, documents, with interviews and photographs, the horrific conditions at Alang. The authorities maintain no proper records of workers; indeed it is clear they do not want any record to be kept. Records of deaths are kept only by the employers, who naturally understate the number greatly. The workers fear for their jobs, and the employers do not tolerate trade unions. There is of course no monitoring of toxic waste-related diseases; sampling of the environment shows that workers exposed to deadly asbestos fibres 24 hours a day. All this is made possible by the feudal conditions in the rural areas. Local (Gujarati) workers are a minority; the bulk are migrant workers drawn from backward regions of Orissa, U.P., and West Bengal. It is estimated that there are about 800,000 workers from Orissa in Gujarat, 90 per cent of them in hazardous industries such as ship-breaking. A particular recruiting-ground is Ganjam district, which, despite its fertile paddy land and water resources, is marked by unemployment due to landlessness. It is estimated that one man in each household leaves the district in search of work, many traveling to Gujarat and Maharashtra. Adapada village, for example, has as many as 22 Alang shipbreaking widows and many Alang cripples. In the words of a worker from Khaling village, “If I go to Alang maybe one person will die, but if I stay five people will die.” The connection between feudal conditions and the conditions of labour in Indian industry could not be more concisely stated.
We cite these industries merely as instances, to illustrate once more the broader point that devastation of the environment and physical damage to workers and other people do not get reflected in the calculation of ‘growth’. Perhaps the state with the fastest-growing industrial sector in India is Gujarat, but it is also the most polluted; pollution is greatest in the two belts in which industrial investment has been concentrated since the 1980s, the so-called ‘Golden Corridor’ and ‘Silver Corridor’.
We may also take note here of certain other industries which, using the country’s backwardness, use the human body itself as a site for surplus extraction. India’s giant pool of poor and unemployed forms the basis for the boom in such strange industries as clinical trials, rent-a-womb, and illicit (but quite organised) organ export. For example, the factors that attract clinical research organisations (CROs) to India are telling: the low costs of conducting trials, the availability of trained humanpower and infrastructure, the ease and rapidity with which patients can be enrolled, and the abundance of people in India with health conditions of interest to the international drug market. A particular attraction to drug firms is that many potential participants in trials are ‘treatment naive’ – they have never received treatment for their illnesses. In the words of the website of one CRO, part of the “India Advantage” is “40 million asthmatic patients, about 34 million diabetic patients, 8-10 million people HIV positive, 8 million epileptic patients, 3 million cancer patients”.41The Indian Government has recently decided to allow clinical trials in India simultaneously with other countries, despite the difficulty in Indian conditions of monitoring the health of participants in such trials – drawn largely, if not exclusively, from the poor. This is part of the Government’s effort to promote clinical trials as a ‘growth’ industry: according to Union health secretary P. Hota, “India has the potential and a great opportunity to emerge as a global centre for clinical trials. We need to have the right kind of institutions, right legislation, human skills and budgetary and other administrative support.”42 The number of externally-sponsored clinical trials in India reportedly has risen sharply after certain legislative changes in January 2005. The Maharashtra government reportedly plans to assist CROs in using its public health infrastructure for clinical trials. The Centre has allowed drug companies to fund trials through registered research trusts; they would receive 100 per cent tax exemption for their donations to such trusts.43
Luxury industries
(v) There has been explosive growth in luxury consumption industries – airlines, automobiles, high-end mobile instruments and services, a multitude of other electronic gadgets, furnishings, designer clothing, malls, five-star restaurants and hotels, jewellery, art galleries. Indeed, there are now two tiers of luxury consumption: only the higher tier is demarcated as ‘luxury’ by the media.
Top bracket: There are a number of magazines now devoted exclusively to such luxury spending: for example, the India Today group magazine Spice (“Redefining Lifestyle”), Splurge (“The HT Luxury Magazine”), T3 India (“The World’s No. 1 Gadget Magazine”), the Business Standard publication How to Spend It (now re-named, more simply and forcefully, Spend). The universe of ‘lifestyle’ magazines is larger: for example, Vogue is to launch an Indian edition soon. Conferences are held of the luxury industry as such: The Hindustan Times has organised two conferences on luxury, and the Economic Times joined in with its “Dialogue on Luxury” conference in 2007. In October 2006 the Luxury Marketing Council (LMC), an international organisation of 675 luxury-goods firms, opened its India chapter. According to the head of the Indian chapter, much of its activity is educational, such as “instilling in the Indian public a proper understanding of luxury. ‘How do you educate them’, she asked, ‘about the difference between a designer bag that costs $400 and a much cheaper leather bag that functions perfectly well?’”44
This explosion in luxury expenditure is depicted by the reigning orthodoxy as a positive sign of the growth of the economy. However, luxury consumption diverts a sizeable part of the economic surplus from re-deployment in productive uses. Moreover, while the luxuries of the Mughal era too diverted a large share of the surplus from productive uses, they did generate demand for a domesticindustry manufacturing luxuries; whereas the post-colonial luxury market of third world countries is heavily import-oriented, and thus gives a far, far weaker boost to domestic demand – rather, it operates as a drain of surplus from the country.
For example, the number of private jets (which according to one report cost $12-56 million45) has risen from 50 in 2005 to 120 in 2007, and is projected to reach 300 by 2010.46 Assuming the average cost to be $20 million47, the annual cost of purchase alone would rise from $700 million in 2005-07 to $1.2 billion in 2007-10. Sales of luxury cars such as Mercedes-Benz, BMW, and Porsche, imported fully assembled, have risen from 2,500 in 2006 to 4,500 in 2007.48 Prices range between Rs 2.5 million and Rs 50 million.
Luxury real estate is a booming sector. The concept of ‘gated communities’ (luxury housing estates self-sufficient in facilities, separated from the surrounding area by physical barriers and policed by private security) has been introduced in India, and many returning non-resident Indians find their lifestyle there no different from that in the U.S.. For the top tier, of course, even this will not do. For example, Mukesh Ambani is building himself a 27-storey house (with the height of a regular 60-storey building) in one of Mumbai’s most expensive neighbourhoods, at a reported cost of $1 billion (Rs 40 billion – the size of a major industrial investment, or the combined annual budget of all the five Union territories). Equipped with three helipads and an air traffic control room, six floors for parking 168 imported cars, theatres, gyms, and various other necessities of life, the building is to house 6 family members and 600 staff.
As noted by the India head of the LMC, the satisfaction derived by the consumers of such luxury goods is based on their being demarcated as luxury goods. As larger numbers now drive cars, take flights, use mobile phones, and so on the rich need to shift to goods and services which are out of bounds for these new entrants. However, from our point of view, the luxury sector is much wider in the conditions of a poverty-ridden country like India, and includes various non-essential goods and services which can be afforded by a only a small fraction of the population. These are not produced to meet existing demand; rather, demand has to be created by means of advertising and other forms of promotion. While they are adopted at first by the wealthiest sections, wider social sections soon feel compelled to join in.
Air travel: For example, only around 1-3 per cent of India’s population travels by air.49 Yet not only has air travel become a major industry in India: the Government has taken up promotion of the sector as a mission. Domestic and international air passenger traffic (combined) has almost doubled between 2004 and 2007. The latter is growing particularly fast; indeed, at 32.5 per cent in 2007,50reportedly faster than in any other country. The Railways have been reducing their air-conditioned class fares to recover customers who have shifted to air travel. This growth requires huge imports. In 2004 airline operators in India had only 125 aircraft;51 now, according to the Economic Survey 2007-08, the country’s 14 scheduled airline operators have 334 aircraft, and were given permission during 2007 for import of another 72. Further, the ministry has given “in-principle” approval for import of 496 aircraft, of which more than 250 aircraft are likely to be acquired in the next five years by scheduled airlines. In short, the Indian aviation sector has emerged as a gold mine for the world’s duopoly, Airbus and Boeing: the two have 400-450 aircraft on order from India.52 The price tag averages around $100 million per aircraft.
The growth of domestic private airlines has been fueled by foreign funds: for example, Goldman Sachs, BNP Paribas, and the Dubai government’s private equity fund have invested in SpiceJet, and HSBC in Jet Airlines. Private equity funds have also invested in the firms which have taken over Mumbai and Delhi airports. The rapid growth of the sector is one of the factors in ‘transport’ becoming one of the fast-growing heads of GDP. Yet, to return to the broad theme of this section, its contribution to GDP does not make it desirable per se: rather, it is a luxury enjoyed by a trivial percentage of the population, causing drain of foreign exchange in multiple ways (on import of planes and their servicing; on fuel; on profits of foreign investments in the sector), appropriating large areas in cities and their vicinity, and causing environmental damage. Far from being promoted, air travel should be minimised, particularly in a poverty-ridden country.
Automobilisation: Automobilisation too is a harmful luxury in India. At present car ownership is roughly seven persons per thousand; even if we assume there to be only one car per car-owning family and five persons to a family (neither assumption holds true for upper-income urban families), this represents less than four per cent of the population. Even if the market were to double with the production of cheaper cars like the Tata Nano, car owners would remain a small minority of the population. (The market for two-wheelers is five to six times as large as for cars; not only are their prices a fraction of car prices, but they are also much cheaper to run and maintain, and easier to park. Tata’s explicit aim with the Nano is to take market share away from two-wheelers.)
On the other hand, the growth of cars and two-wheelers (particularly the former) actually worsens conditions for those who do not own personalised transport: For the condition of bus transport is worsened by the growth of traffic. In the last five years, there has been a 43 per cent increase in vehicles on India’s roads, but only a 9 per cent increase in road space. As a result the speed of traffic in cities has slowed to 10-15 kilometres per hour.53 This in turn means that a given number of public buses can make less trips per day, and thus transport less passengers than they could have with less traffic. Indeed, a part of the middle class is driven to buy two-wheelers and even cars precisely because of the decline and crowding of public transport; this winds up reinforcing the trend toward crowding. (We are ignoring here the pollution effects of automobiles and two-wheelers.)The failure to check the growth of passenger cars and to promote public transport exemplifies the gross class bias in all of India’s urban planning. According to one writer, cars in India “occupy the lion’s share (75 per cent) of road space but meet less than 5 per cent of the travel demand. Buses, by contrast, occupy a mere 5 per cent of road space but deliver up to 60 per cent of commuter trips.”54
Far from checking the growth of passenger cars, the Government subsidises the use of automobiles, and thereby boosts demand for the automobile industry in a number of ways and burdens public transport. It is important to realise that without these large subsidies, maintaining an automobile would have been prohibitive for all except a trivial section of the population, which is to say the market would have been far, far smaller. Secondly, the Government provides a number of direct subsidies to the automobile industry, through tax concessions, provision of cheap land, and even interest-free loans. We have dealt with these subsidies later in this essay.
The mall phenomenon: Only a small fraction of even urban India can afford to shop at malls, which largely house upmarket brands, and generally have to be reached by car. Some others come to gape at the displays and hang around, adding to what in marketing lingo is referred to as ‘footfalls’, but not to purchases; however, these are seen as nuisances by the mall-owners, who do their best to keep them out or prevent them from hanging around. It is possible that the market for malls has been over-estimated, but the frenzied growth in their construction has at least created a market for the real estate/construction industry. In 2002 India had 6 malls with 1 million sq ft; it had 90 with 19 million sq ft in 2007; and these figures are expected to triple in 2008.55
India’s ‘middle class’
It is true that the market for luxury industries in India now includes what are called the ‘middle classes’. However, the term conjures up a misleading analogy to the sizeable ‘middle class’ of the U.S., Europe and Japan. By comparison this class is a small segment of Indian society. The media frequently uses a figure of 200-250 million for India’s middle class, but it is difficult to imagine the basis for this. The international consulting firm McKinsey uses a figure of 50 million for India’s middle class, or less than 5 per cent of the population.56 According to the NSS 2004-05, about 89 per cent of the population spent less than Rs 37 per day (which was $0.83 at the then exchange rate).

Table 2: Distribution of Rural and Urban Population by Monthly Per Capita Expenditure (Rupees) during 2004-05

Rural Population (72.2 %)		Urban Population (27.8%)
MPCE Class (Rs.)	Population (%)	MPCE Class (Rs.)	Population (%)
<235	3.4	<335	4.4
235-270	3.8	335-395	4.5
270-320	8.8	395-485	9.5
320-365	10.5	485-580	11.4
365-410	10.6	580-675	11.1
410-455	10.0	675-790	10.0
455-510	10.8	790-930	10.1
510-580	11.3	930-1100	9.1
580-690	11.6	1100-1380	9.7
690-890	10.1	1380-1880	9.7
890-1155	5.2	1880-2540	5.6
1155 & over	4.0	2540 & over	4.9
MPCE: Monthly per capita expenditure Source: National Sample Survey, 2004-05, Report no. 515.

India has a strange official definition of poverty, whereby those spending over Rs 12 per capita per day are considered ‘not poor’. The National Commission on Enterprises in the Unorganised Sector (NCEUS), has correctly highlighted the fact that the overwhelming majority of the population – which it estimates at 77 per cent, or 836 million people – are living on Rs 20 or less a day. It terms these the “poor and vulnerable” sections of the population. However, it is on shakier ground when it terms the entire remainder as “middle and high income”. The segment which it classifies as “middle income” is a large one (19.3 per cent of the population in the NSS 2004-05), with an average daily expenditure of Rs 37. However, Rs 37 per day was just $0.83 at the nominal exchange rate at the time, and less than $2.50 at revised Purchasing Power Parity rates for 200557 — far below the level that would be described as “middle income” in developed countries. Per capita income in the U.S., for example, was over $40,000 in PPP terms in 2005, or over $110/day.
As we discuss later, the really wealthy in India appear to be missing from NSS surveys; this distorts their findings. Those who are described here as “high income”, with a reported daily expenditure of Rs 93, are what in common parlance would be referred to as ‘middle class’. According to the NSS 2004-05, they constitute some 4 per cent of the population. Together with the wealthy – who would constitute two or three more percentage points – they would constitute the booming consumer market that is the darling of global investors.
It is the vast size of India’s population that makes even such a small segment of it constitute an attractive market for international firms. Certain luxury goods industries, such as mobile telephony, air travel and automobiles, have managed to stretch their market downward by extending credit and reducing prices (or introducing cheaper versions). Mobile instruments and telephony have managed to reach even a large section of the urban working class and other urban poor.58 However, this expansion of the market for luxury goods is very different from the expansion of the market that follows from the growth of wage employment. The latter expands demand for wage goods like food and textiles, which have many backward linkages, further expanding employment and demand for wage goods. At any rate, the bulk of luxury spending is carried out by a tiny elite.
Growth of luxury consumption a manifestation of growing inequality
The growth in luxury consumption is generally portrayed as a manifestation of India’s rapid economic growth. However, it is actually a manifestation of increasing inequality: it has occurred during a period of redistribution of income away from the base and toward the summit.
The suppression of the consumption of the vast masses of people is most visibly evident in the decline of their basic nutrition: in the rural areas, per capita calorie and protein consumption levels have declined by 5 per cent and 5.3 per cent between 1993-94 and 2004-5, and in the urban areas the former has declined by 2.5 per cent while protein consumption has stagnated. Rampant undernutrition is confirmed by appalling nutritional outcomes, which are refusing to improve. Half of India’s children are measurably undernourished, and the figures are high even in urban areas; two-fifths of rural women and one-third of rural men too are measurably underweight.
Conditions of widespread poverty have posed a fundamental obstacle to India’s industrial growth since the departure of the British. Equally, they have acted as a brake on the wishes of foreign investors. Foreign corporations and large Indian firms are in general not interested in trying to reach the vast, widely dispersed market of low-income consumers, for this is a market with very low profit margins. Thus they, and the institutions which represent their interests (such as theWorld Bank), are not interested in pushing about broader, long-term development on the expectation that it would yield them markets eventually. For (i) the time frame of such firms is short – their investments should yield profits in three to five years; (ii) there is no guarantee that even after a length of time it would be a high-profit market; and (iii) there is no guarantee that they would capture the market created by such development – some other local, smaller entrepreneurs might capture it. Thus they press, both directly and through institutions like the World Bank, for policies which concentrate income further among the elite, and in developed regions and urban areas, for these are the markets that they can reach easily, and which are highly profitable. The growth of the luxury industry in India is linked to the growth of economic exclusion of the vast majority.

E. State Intervention to Transfer Surplus to the Private Corporate Sector
Privatisation and the concentration of wealth
Among the factors accelerating the concentration of wealth in this period has been the privatisation process. Privatisation has taken various forms: for example, the disinvestment of shares of public sector firms (or raising of capital by such firms from the share market); the sale of public enterprises with handover of management control to private firms; ‘public-private partnerships’ in the infrastructure sector; and the opening up of profitable sectors such as telecommunications hitherto closed to private firms.
(i) Virtually all partial disinvestment of shares in public sector firms has been carried out consciously at prices which are ‘attractive’ to investors, namely, at prices which yield investors a bonanza. This was deemed to be necessary to ensure the ‘success’ of privatisation. As a result, from the very first disinvestment, these sales have attracted wide criticism, including from the Comptroller and Auditor General (CAG). Gross irregularities in the very first round (1991-92) allowed a handful of buyers to depress prices to below the reserve price set; the CAG put the loss at Rs 34.42 billion on receipts of just Rs 30.38 billion. Going again by the need to ensure the ‘success’ of the disinvestment, only shares of profitable public sector units have been sold. The largest bonanza took place in March 2004, during the last days of the National Democratic Alliance (NDA) regime, when the Government earned Rs 153.32 billion from the hurried sale of shares of six firms, including the hugely profitable Oil and Natural Gas Corporation (ONGC). The Disinvestment Minister admitted that shares were being sold at a discount, but said “There’s very little that we can do as the disinvestment proceeds are required by [the Finance Ministry] by the end of the current fiscal to arrive at the magic figure of the fisc.”59 Little wonder that FIIs keep pressing for further disinvestment.
(ii) Virtually every sale with transfer of management to private firms has handed over assets at scandalously depressed prices. Various disinvestments and outright sales have attracted sharp criticism from official bodies. Between 2000 and 2002 the Government sold and transferred nine firms to the private sector, among them Balco, Hindustan Zinc, VSNL and IPCL. The CAG found that the valuation of the firms’ assets was done without adequate time or “due seriousness”, riddled with irregularities. In several cases it found that substantial “surplus land” was sold along with the company; this suggests that real estate gains were the key motive to some of the deals (eg., Hindustan Lever’s takeover of Modern Foods). In some cases major assets (mines in the case of Hindustan Zinc!) were arbitrarily excluded from the valuation.60 This report came on the heels of the CAG’s strictures against the Department of Disinvestment for the manner of sale of two five-star hotels in Mumbai. In brief, the entire process constituted a huge private plunder of State-owned assets.
(iii) The opening up of the telecom sector has been executed in such a fashion as to allow private firms to occupy the most profitable arenas – urban areas, mobile telephony – and leave the responsibility of extending landlines to the rural areas to the public sector. In fact, not only have private firms utterly failed to extend telephony to the rural areas in the circles awarded to them, but the meagre cesses collected from them to compensate the public sector for the costs of extending rural telephony are being wound up by the aggressively pro-privatisation Telecom Regulatory Authority of India. For several years the Universal Service Obligation Fund (USOF) was deliberately not disbursed to the public sector firms for its stipulated purpose (extending inexpensive landline telephony to the rural areas); as a result, around Rs 150 billion has accumulated and lies idle in the USOF. In a remarkable twist, this amount is now to be given as a subsidy to private mobile service providers to help them extend their operations to the rural areas.
The Electricity Act will allow private firms in generation to sell to select large consumers, rather than the grid; this will reduce the costs of the industrial consumers, boost the profits of the private generation firms, and worsen the financial condition of the public sector firms. The latter will be saddled with the losses of extending electricity to far-flung, low-consumption rural areas.
(iv) The Eleventh Five Year Plan envisages Rs 20 trillion (or $500 billion @ Rs 40/$) investment in physical infrastructure (electricity, railways, roads, ports, airports, irrigation, urban and rural water supply and sanitation) during the period 2007-12. This is estimated to be 9 per cent of GDP, up by 4 percentage points over the figure for the Tenth Plan (2002-07).
India’s savings rate surged by 11.3 percentage points between 2001-02 and 2006-07, and is projected to rise further in 2007-08 (to reach 35.6 per cent). Given this abundance, one would have thought it no problem for the public sector to find finance for the projected growth in infrastructure, either from its own surpluses or by borrowing. It should be noted that much of this activity is already profitable within the public sector: for example, airports, ports, and now railways are all profit-spinners. (Not all such infrastructure is desirable for genuine development; however, we shall not go into that question here.)
The Government, however, constituted a committee headed by a private bank chairman to produce a list of reasons why the public sector could not carry out the necessary investments, and argue that “public-private partnerships” (PPPs) were required. With such alibis, the Government has decided to promote PPPs to fill the alleged gap in infrastructure financing. Foreign direct investment up to 100 per cent is invited. Contracts have been awarded and projects are under way for 221 PPPs with an estimated cost of Rs 1.30 trillion ($32 billion). If ‘user charges’ do not sate private firms’ appetite for revenues, the Government would provide ‘Viability Gap Funding’ – which is simply another phrase for a Government subsidy to guarantee an agreed rate of return on investment. Further, infrastructure PPPs would enjoy generous tax concessions.
State assistance is on the way to step up the PPP drive. The publicly-funded India Infrastructure Project Development Fund would provide up to 75 per cent of project development expenses as an interest-free loan. The Government plans to set up an India Infrastructure Finance Company Limited to provide long term loans (no doubt, on generous terms) to infrastructure projects. The Central State governments and Central ministries are being provided with “technical assistance in the form of in-house PPP experts, financial/risk experts, Management Information Systems experts, and access to a panel of legal firms.” “Transaction advisers” from the Asian Development Bank are to steer the process.
(v) The tacit privatisation of health care and education with the retreat of the State from these sectors (expressed in the form of decline of State expenditure as a percentage of GDP on these heads) similarly widens disparities. The worsening state of nutrition (which we discuss later) is due not only to the deterioration in agricultural production but also to the Government’s tacit policy of privatisation of health, education, and transport: for this has forced the poor to spend more on these services, leaving less for food. The Planning Commission, in its Approach Paper to the 11th Plan, notes that “A very large shift, of at least five per cent of total private consumption, has occurred over the last decade from food to health, education and conveyance,” and expresses the hope that increased public expenditure on health and education can reverse some of this shift. This is the nearest it can get to saying that the privatisation has suppressed consumption of food.

Subsidies to big industry
While the neo-liberal programme condemns subsidies such as those on food and fertiliser, and the supposed subsidy on petroleum,61it promotes an array of subsidies to the private corporate sector. These subsidies take various forms.
First, there are large transfers disguised in form of sums owed to the State by the corporate sector which the State makes no serious attempt to collect. Large borrowers with 11,000 individual accounts accounted for as much as Rs 400 billion of total bad debt of banks by 2001-02. Among public sector banks too high-value defaults involving 1,741 accounts over Rs 50 million amounted to Rs 228.66 billion. (Even these may be understatements, since banks tend to ‘evergreen’ corporate loans, providing fresh loans in order to prevent default.) Whereas banks frequently attach the entire property of defaulting peasant borrowers and even have them arrested, no such stringent measures have been taken with the big borrowers, and, unsurprisingly, efforts to recover bad debts have met with little success. Banks’ bad debts have been reduced over the last few years not largely by collection, but by lengthening the schedule of repayments, making provision for bad bad debts out of banks’ profits earned elsewhere, and infusion of capital by the Government into the public sector banks.62 Large uncollected tax arrears, amounting to about Rs 390 billion on corporation tax and Rs 200 billion on customs duty, excise, and service tax,63 amount to another implicit transfer to the corporate sector.
A second major subsidy is tax concessions. One should keep in mind that a tax concession is no different from a subsidy: it is the equivalent of the Government returning to the tax payer a portion or the whole of tax payable by him/her. The total of tax revenue forgone on corporation tax, excise duty and customs duty was estimated at Rs 2.36 trillion in 2007-08, which was over half the total revenues actually connected under these heads in that year. (Apart from this revenue forgone on personal income tax was Rs 421.61 billion, which was 35.5 per cent of the revenues from individual tax payers.)
The State makes large land acquisitions on behalf of the private corporate sector, using the colonial-era Land Acquisition Act (1894). Even where the State pays what it calls the market rate for such land as it acquires, private firms stand to benefit greatly: for the market rate is calculated on the basis of sale prices of land in the previous period. Not many land sales take place in the period leading up to acquisition, and such sales as take place may understate the price in order to avoid stamp duty. Moreover, once the private firm’s project is announced market prices for land rise sharply: by acquiring it on behalf of the firm at pre-project prices, the State saves the firm huge costs. Frequently the acquisition price does not even correspond to pre-announcement market prices: for example, in the case of Manimajra village, on the outskirts of Chandigarh, the difference between the open auction rates of land (bought by builders Uppals Housing and DLF) and the rate at which 626 acres has been/is being acquired by the Chandigarh administration for the Rajiv Gandhi Chandigarh Technology Park comes to Rs 53.78 billion. The beneficiaries include Infosys, Wipro, Bharti Telecom, and others.
Automobile industry: an instance of State subsidy
The State also extends loans, grants, and supportive infrastructure to the private corporate sector. Let us take the example of the automobile industry.
(i) State policy deliberately promotes the use of passenger automobiles against public transport. According to one study, the tax burden on buses in India is 2.4 times that on passenger cars. In Mumbai, cars make a one-time tax payment to the municipality of 4 per cent, whereas buses pay a 17.4 per cent tax annually.64
(ii) Unlike the case in many developed countries, in India free parking space is made available for cars on city roads; and even municipal parking lots charge Rs 10 for 12 hours. According to the Centre for Science and Environment, transport regulators calculate the amount of land required to park a car at an average of 23 sq metres (which includes the space occupied by the vehicle as well as the minimum space needed to move it into and out of the space). At this rate, even paid parking comes at Rs 26/sq metre per month, or Rs 600 per month per vehicle. This is a tiny fraction – perhaps a few percentage points – of the rent for an equivalent space. (It is worth comparing this space to the standard space allotted to evicted slum families in rehabilitation projects: 21 sq metres, or 225 sq ft.) More to the point, it does not begin to meet the costs of road construction and maintenance in proportion to private automobiles’ share of road traffic.
(iii) Innumerable flyovers, bridges, elevated corridors, and so on are built in cities for the benefit of car owners; as mentioned earlier, these are generally out-of-bounds for buses. In 2005 Delhi was reported to be in the process of building 50 flyovers, at an average cost of Rs 400 million per flyover; the budget for a super ring road and elevated corridor on the existing ring road was put at Rs 40 billion. Mumbai has constructed an even larger number of flyovers, but much more expenditure is to come: for example, major bridges across the sea are coming up, with the Bandra-Worli sea link alone to cost Rs 13 billion.
(iv) We have already mentioned the National Highway Development Programme (NHDP). The estimated cost, at 2004 prices, of Phase-I and Phase-II of the NHDP, is Rs 650 billion (about half of this is complete); the estimated cost of Phase-III, which has been approved, is Rs 806.26 billion; and so on. The NHDP is funded by a cess on fuel as well as Government borrowings.
It may be objected that road and highway construction cannot be considered a subsidy to automobile users, and thereby the industry, since all road traffic benefits from it. However, this would be so if the costs of road and highway construction were recovered from private automobile users in proportion to their use. This is not done; instead the burden falls on public funds. Particularly in the case of urban roads, the overwhelming share of usage is enjoyed by private automobiles. Significantly, the Automotive Mission Plan, drafted by the private automobile industry and rubber-stamped by the Government in 2006, calls for highway development and urban flyovers as a measure of promotion of the automobile industry. (We describe this plan further below.)
If the full costs of road infrastructure were collected from automobile users, a very large percentage of them would find it impossible to maintain automobiles, and hence the market of the auto industry would shrink. Thus the auto industry is critically dependent on these indirect State subsidies. (This is particularly so because in the auto industry, bringing down costs per unit depends on achieving a certain minimum scale of production.)
The Government also directly subsidises the automobile industry in various ways, and is planning to expand this further. It has steadily brought down the rate of excise tax on small automobiles, from 24 per cent to 16 per cent and now 12 per cent in the latest Budget. (By comparison, the rate of excise on soaps and detergents is 16 per cent.) It is reported that 70 per cent of the cars sold in India qualify for this concession. The rate of customs duty on raw materials for the auto industry is now 5-7.5 per cent; and it receives a tax deduction of 150 per cent for R & D expenditure.
In 2006 the Government launched a 10-year Automotive Mission Plan (AMP) to develop India as a global manufacturing hub (i.e., an export base). The AMP was drawn up by the auto industry itself, with each sub-group chaired by the head of a top auto firm (Tata, Mahindra, Maruti). It was released by the Prime Minister as the plan of the Ministry of Heavy Industries. The AMP envisions a much larger programme of subsidy (see Box).

Subsidies to the Auto Industry under the Automotive Mission Plan

1. Tax concessions: (a) A tax holiday for auto industry investments exceeding Rs 5 billion. (b) 100 per cent tax deduction on export profits. (c) Deduction of 30 per cent of net income for 10 years for new auto industry undertakings. (d) Zero taxes/levies on technology transfers for the automobile industry (products, features, etc.) (e) An increase in the deduction for R & D expenditure from 150 per cent to 200 per cent, whether the deduction is carried out in-house or externally. (f) An excise duty concession for ‘Made in India’ products to all companies, regardless of ownership.

2. “State governments [are] to be urged to offer” concessions such as (a) preferential allotment of land “as is given to IT sector by different state governments, and (b) exemption of electricity duty for five years “as is done for biotech industry in some states”, to promote captive generation of electricity. Of course, state governments have already been providing land to industry well before the AMP.

3. Outright expenditure by the Government: (a) 100 per cent grants for fundamental research, 75 per cent for pre-competitive technology/application, and 50 per cent for product development. (b) The Government has already set up, under the AMP, a National Automotive Testing and R & D Infrastructure Project at a cost of Rs 17.18 billion to enable the industry to usher in global standards of safety, emission and performance.

It would require a large exercise to calculate total State subsidies to the automobile sector. Ashok Mitra, former finance minister of West Bengal, has calculated the subsidies offered by the West Bengal government to the Tata Nano. Close to 1,000 acres of land has been acquired from peasants by the state government for Rs 1.5 billion and handed over to the Tatas, who are to pay trivial sums on the 90-year lease. Secondly, the state government has extended a loan to the Tatas worth Rs 2 billion at a nominal interest rate of 1 per cent (against the 10 per cent charged by banks); “the principal, one suspects,” says, Mitra, is never intended to be returned”. Finally, for the first 10 years the entire value-added tax on the Nano in West Bengal will be returned as a similar 1-percent-interest loan to the Tatas.65 The total subsidy comes to Rs 8.5 billion from the state government alone. Subsidies from the Centre would be beyond this. How significant is the subsidy element in total costs? According to news reports, the Tata Nano was developed at a cost of Rs 17 billion, “including the cost of the plant that will build it”.66
The AMP justifies generous tax concessions and promotional measures on the basis that India is to become an international “hub” for automobile production, thus expanding markets, GDP and domestic employment. However, according to its own projections, even at the end of the 10-year scheme, 71-78 per cent of sales would be domestic. Given the heavy foreign exchange costs of the auto industry, even if exports fulfilled the AMP’s projections for 2016, the industry might remain a net spender of foreign exchange. As for claims regarding GDP and employment, they are far-fetched and unsubstantiated.67
Privatisation and subsidies have transferred giant assets and income streams to the private corporate sector during the ‘liberalisation’ era. The neo-liberal State has been a crucial support to the growth of the private corporate sector – the same corporate sector that calls for reduction of State intervention insofar as that intervention protects the poor and sectors such as agriculture and small-scale industry. The ruling circles are well aware of this dichotomy. Inaugurating a campus in May 2007, Manmohan Singh aired his anxieties: “I was struck recently by a comment in the media that most of the billionaires among India’s top business leaders operate in oligopolistic markets and in sectors where the government has conferred special privileges on a few. This sounds like crony capitalism. Are we encouraging crony capitalism? Is this a necessary but transient phase in the development of modern capitalism in our country?” Referring to the problems being faced by small-scale domestic enterprises, Mr Singh asked “Whether we, in the name of protecting them (big industry), encouraged crony capitalism? Do we have a genuine level playing field for all businesses?” He left his own question unanswered.

F. The Growth of Inequality and the Fear of Social Unrest
There can be little doubt that the period of ‘liberalisation’ has witnessed a sharp growth in inequality. One need not turn to Leftist economists: Even those working for FIIs and the International Monetary Fund (IMF) have pointed this out in blunt terms. Of course, their concern is that the widespread perception of inequality will lead to political instability, and thus derail the ‘liberalisation’ train.
Chetan Ahya, executive director of Morgan Stanley (MS), raises the alarm: “We believe the rise in inequality, when absolute poverty levels are still very high, poses a major political challenge.... in the long run, a high level of inequality can hurt growth on account of socio-political tensions.” Ahya says MS analysis “indicates that India has witnessed an increase in wealth of over $1 trillion (over 100 per cent of GDP) in the past four years – and that the bulk of this gain has been concentrated within a very small segment of the population.” He cites three measures:
1. Between March 2003 and May 2007, as share prices rose, the value of domestic shareholders’ holdings (i.e, excluding holdings of the Government and foreign shareholders) rose by $570 billion. According to the Securities and Exchange Board of India, only 4-7 per cent of the population owns equities. Even within this group, the ownership is likely to be highly concentrated as almost $350 billion of the increase is accounted for by promoters (controlling stakeholders of firms).
2. MS estimates the value of residential property to have risen by at least $300-500 billion. However, only an estimated 47 per cent of the population own a ‘pucca’ house (a house with walls and roofs made of stable construction materials). Even within this segment of ‘pucca’ housing, the higher-income classes own a large proportion of the area in terms of square feet. (Ahya could have added that the price rise has been highest in high-income areas, such as the well-off localities of metropolitan cities.)
3. MS estimates that the market value of India’s stock of gold has increased by approximately $200 billion since March 2003 to $370 billion currently. This too is concentrated in the top third of the population.68
Further calculations of growing inequality have been made by an equally unlikely source. A recent IMF paper69 warns that “the ability of the government to pass and sustain reform momentum depends on popular support. If large parts of the populations are left behind, even if only in relative terms, the viability of future reforms may be threatened.” On the basis of National Sample Survey (NSS) results, it shows that “Overall consumption inequality increased in the 1990s, particularly in urban areas, and within almost all states according to a variety of measures. While inequality was stable (in urban India) and declining (in rural India) in the 1980s, this trend was reversed in the 1990s. As real consumption growth was significantly higher in urban areas, the urban-rural gap widened.” Indeed, as the NCEUS has pointed out, consumption by the top 4 per cent of the population recorded in the NSS grew at more than six times the rate as consumption by the bottom 36 per cent of the population.70
However, NSS data may fail to capture the real extent of inequality. Indeed, over the years the gap between national income data and NSS data for household consumption has grown sharply (see Table 3). National income data on household expenditure is generated by estimating the output of goods and services consumed by households; NSS data is gathered from asking people about their consumption of those goods and services. If respondents to the NSS are understating their consumption, this would show up as a gap between the total figure for consumption arrived at through the two methods.

Table 3: Annual Average Growth Rates of Household Consumption Expenditure by National Income Data and National Sample Survey Data, 1983-94 and 1994-2005

Period	National Income Data	NSS Data
1983 to 1993-94	1.84	0.91
1993-94 to 2004-05	3.30	1.31
Source: India: Selected Issues, IMF, 2008. In constant prices.

Which section of respondents would understate their levels of consumption, or would tend to be left out of an official survey? It is unlikely that the wealthy would reveal to official surveyors their real levels of consumption expenditure. Indeed it is unlikely that the rich would cooperate with a time-consuming survey in the first place, as a result of which their consumption would not be captured in the NSS data at all. Thus according to NSS 2004-05, the top 4 per cent of the population have an average per capita expenditure of just Rs 93 per day, or Rs 2800 per month, which is scarcely credible; as we mentioned earlier, this corresponds to what we would normally call ‘middle class’ by Indian standards.
Table 3 depicts a growing divergence between the NSS and national income data. Taking the 1983 figure as 100, the national income figure would have reached 161 by 2003-04, whereas the NSS figure would be less than 125. This gap could be accounted for by the unsurveyed rich.
A recent study71 based on income tax returns calculates that the share of the top 1 per cent of Indian households in national income doubled between 1981-82 and 1999-2000; this increase in the reported income of the rich could account for around 40 per cent of the above-mentioned gap. (Interestingly, the steepest increase was in the income of the top 0.01 per cent of the population during the 1990s, ending the decade at 150-200 times average income for the entire population.)
Given that the rich have ways of hiding a large share of their income from the income tax authorities, and that landlords pay no tax at all, it is likely that the gap between the national income and the NSS figures could be largely explained by the failure of the NSS to capture the income of the rich. Thus inequality is likely to be far, far greater than even the grave levels depicted in the NSS.
This picture of a very skewed distribution of income or expenditure fits in with press reports of an even more skewed distribution of assets: namely, lists compiled by Forbes and Business Standard of the number of billionaires in this poverty-stricken country. Among the 10 richest persons in the world listed by Forbes (as of February 11, 2008), 4 are Indians – 3 if we exclude Lakshmi Mittal (who does not reside in India). In all there are 53 Indians on the list, with a combined net worth of $334.6 billion (about Rs 13.38 trillion). Their combined wealth increased by 75 per cent over the previous year. The number of billionaires in India was higher than China (42) and Japan (24), though slightly less than Germany (59). It is true that the size of the wealth of Indian billionaires might fluctuate sharply with share prices (much of the growth in the number of Indian billionaires and the size of their assets appears to be linked to the surge in share prices during the previous year), but that might be true of billionaires from many other countries as well.
The average wealth of these 53 Indian dollar billionaires was $6.3 billion, or over Rs 250 billion each. Let us take an illustration to get an idea of how large this amount is. In 2002-03, the average asset-holding per Indian household was around Rs 300,000 (in current rupees).72 If we (arbitrarily) assume that the asset-holding per Indian household has doubled in current rupees by February 2008, each of India’s 53 billionaires would have assets equivalent to those of over 400,000 Indian households; the combined assets of the billionaires would be worth almost 9 per cent of the assets of all the households in the country.73 We have taken this merely as an illustration, not as an actual estimate; but it gives one a sense of scale of inequality in asset-holdings.
Business Standard’s list of Indians with assets of over Rs 1 billion as of August 2007 comes up with a rather lower figure, perhaps partly because Indian share prices had risen steeply between the date of its list and that of the latest Forbes list. Nevertheless, the top 50 in the Business Standard list had combined assets of Rs 8.89 trillion, and the complete set of 533 rupee billionaires had assets of Rs 12.14 trillion. Again, for illustration’s sake, if we assume assets of Rs 600,000 per Indian household, the top 50 each owned assets equivalent to 300,000 Indian households. The 533 rupee billionaires would have combined assets of almost 8 per cent of the assets of all the households in the country.
Another way to get a sense of the size of the wealth of the billionaires’ wealth is by comparing it to India’s GDP. The wealth of theForbes 53 would be around 28.5 per cent of India’s 2007-08 GDP; that of the Business Standard 533 would be around 29.3 per cent of India’s 2006-07 GDP.
Contrary to propaganda in the media, this proliferation of Indian billionaires is not an indicator of development but ofunderdevelopment. So skewed a distribution of assets is indeed the hallmark of third world countries. The narrow employment base, narrow markets, and stifling social order prevalent in these countries are capable of grinding vast masses to abysmal levels of poverty even as a handful of parasitic monopolists flourish at unimaginable levels. The “four big families” of China in the 1930s and 1940s, and similar coteries in various Latin American countries, pre-1975 South Vietnam, Indonesia, Philippines, and so on are familiar to students of history.
Not all the members of the establishment are ignorant of this history, or its significance: Namely, that all such countries have suffered acute political instability, in some cases leading to revolution. The Prime Minister gave vent to his fears at a May 2007 conference organised by the Confederation of Indian Industry (CII) on “inclusive growth”. First, in line with his statement earlier the same month on “crony capitalism”, he emphasised that free competition, not cartels, should reign: “Profit maximisation must be within the bounds of decency and greed (sic). The operation of cartels by groups of companies to keep prices high must end.”
Secondly, moderation and discretion should be observed in top salaries and in expenditure; “In a country with extreme poverty, the industry needs to be moderate in the emoluments.... Rising income and wealth inequalities, if not matched by a corresponding rise of incomes across the nation, can lead to social unrest...” Pointing to ostentatious weddings, he said that “Vulgar spending insults the poverty of the less privileged... and plants the seeds of resentment in the minds of have-nots.” He quoted Keynes to suggest that Indian capitalists, like the early capitalist class of Europe, should eschew accelerated consumption in favour of ploughing their surpluses back into their businesses.
Thirdly, he requested the corporate sector to display “corporate social responsibility”, without which it would be hard for him to introduce further pro-capital ‘reforms’: to be globally competitive, “you must work in a harmonious environment, an environment in which all citizens feel actually involved in economic growth and in which each citizen sees hope for a better future.” Unless workers felt they were cared for, “we can never evolve a national consensus in favour of more flexible labour laws aimed at ensuring that our firms remain globally competitive.”
Finally, he issued a grim political warning: “If those who are better off do not act in a more socially responsible manner, our growth process may be at risk, our polity may become anarchic and our society may get further divided. We cannot afford these luxuries.” (emphasis added)
The speech created a brief commotion, but no one mentioned its most curious aspect: It is traditionally expected that the State would act to check such developments as threaten the existing social order, by taking, if necessary, actions that restrict even the wealthy and powerful, in their own long-term interest. Evidently this option is not open to the Prime Minister. Under the present order, all the engine driver can do is plead with the speed-hungry passengers that the train is hurtling toward disaster – even as he shovels the coal. The UPA government, he assured the CII, would continue to create a friendly environment for the growth of manufacturing industry;corporates must facilitate more employment. “The Government has its role and responsibility but so do the better-off sections of our society. This is where I look to the CII for leadership.” (emphasis added)

G. Financial Sector Subordinates the Productive Sector
Even as a tiny domestic elite has flourished in this period of rapid ‘growth’, foreign speculative investment has enjoyed dazzling returns: whereas net inflows of FII investments between 1992 and December-end 2007 stood at $70.78 billion, the market value of FII holdings in listed companies on the Bombay Stock Exchange stood at well over $251.5 billion at December-end 2007. One year earlier (December-end 2006), the market value of FII holdings was $128 billion. In the course of 2007, FII net inflows into India were $24.45 billion. In other words, the total of FII net inflows increased by 53 per cent during the course of 2007; but the market value of FII holdings doubled.
FII inflows are highly volatile, as admitted by the Economic Survey 2007-08. One gauge of the volatility is the proportion of netflows to gross flows of FII capital. That is, if FIIs invest $10 billion during the year, and during the same period remit $5 billion out of the country, gross flows are $10 billion + $5 billion = $15 billion; net flows are the surplus of inflows over outflows, namely, $5 billion; and net flows as a proportion of gross flows is 33 per cent. In the seven-year period from 2000-01, FII net flows/gross flows have generally remained below 13 per cent; in 2006-07 the proportion fell to just 3.3 per cent – that is, gross flows were $212 billion, and net flows were $7.1 billion. The frenetic pace of FII trading is also evident in other measures of volatility given in theEconomic Survey.
A variety of investors operate on international capital markets, including individuals, banks, corporations, mutual funds, pension funds, and what are called ‘hedge funds’. The last are funds which invest the money of a small number of wealthy people seeking much higher than average returns. Manned by professional economists trained in the fine art of gambling, they engage in particularly risky and volatile activity across many markets. For this purpose they resort to ‘leveraging’, that is, they borrow heavily, sometimes 30 times their own capital. This also means that when their gambles fail they are much more likely to collapse, or to sell all their holdings in an attempt to pay off their debts, jolting the share market and the banks which have lent to the hedge funds. Hedge funds are not regulated by the authorities in their home countries, on the assumption that those who place their money with these funds are well aware of the risks of their investments, and the markets in those countries are large enough that they cannot be destabilised by such operators. (Of course, the latter is questionable, given that hedge funds are reported to manage assets of over $2 trillion; the U.S. authorities have had in the past to use public funds to bail out the hedge fund Long Term Capital Management, and more such cases are imminent.) In India, where the share market is small by international standards, the operations of such funds can easily destabilise the market.
In order to moderate the volatility of capital flows, the Indian authorities initially allowed only institutions which are regulated in their home countries, i.e., excluding hedge funds, to invest in India. However, hedge funds found a simple way to bypass this. Let us say a hedge fund wished to buy shares of an Indian firm. It would invest the money with a firm which was registered as an FII in India (the bulk of such business is controlled by five U.S.-based FIIs). The FII would issue it a ‘participatory note’ (PN), underlying which were shares of the Indian firm. Any dividend on the underlying shares would be passed on to the hedge fund (after subtracting a fee); and when the hedge fund instructed the FII to sell the shares, the capital gains on the sale would be similarly passed on to it. The hedge fund could even sell its PN to any other investor on the international market. In the last three years, such PN investments have been estimated to account at various times for between 40 and 52 per cent of all FII investment in India. PNs were used not only by hedge funds, but by any investor who was not registered to trade in the Indian stock market. It is common knowledge that Indian business families have stashed large funds abroad illegally; some of these were brought back via PNs either in order to enjoy high returns or to strengthen their control over their own companies. The same route could also have been used by any other type of shady investor, since it offers complete anonymity to the investor.
All this, of course, made complete nonsense of the attempts to regulate inflows, and the RBI repeatedly called for a ban on PNs. The RBI’s proposal was stoutly resisted by the Finance Minister until the end of October 2007. In the interim the massive surge in inflows destabilised the entire economy. On October 25, 2007, the Securities and Exchange Board of India (SEBI) finally brought in certain restrictions on PNs (the details of which we will not go into here), but at the same time liberalised the direct entry of hedge funds into Indian markets. Since then several of the world’s largest hedge funds (including the largest, fifth largest, and seventh largest), have received SEBI approval to operate as FIIs on Indian markets.74 The returns on hedge fund investment appear to be even higher than for remaining FII investments. According to SEBI estimates, by July 31, 2007, PN holders had invested a total of $17.5 billion; the market value of their investments on that date was $86.3 billion.75
Foreign investors enjoy an astoundingly generous tax regime in India. There is zero tax for Indians and foreigners on ‘long-term’ capital gains – that is, if one buys a share and sells it after one year, one pays no tax on any gain one makes on the sale. (All one has to pay is a transaction tax of 0.15 per cent of the value of the transaction.) On short term capital gains, too, much of FII investment pays no tax, since it comes in through the ‘Mauritius route’. India has had a ‘double tax avoidance treaty’ with Mauritius since 1983, whereby, among other things, capital gains on sale of shares in Indian companies by residents in Mauritius would be taxed only in Mauritius and not in India. Mauritius does not tax capital gains. Thus, with the operning up of the Indian economy after 1991, foreign investors made a bee-line for Mauritius, set up companies on paper there, and routed their investments to India through these conduits. Reportedly the largest foreign investor in India, in terms of both foreign direct investment and FII investment, is Mauritius, with the U.S. a distant second. Of course, if one took into account the ultimate source of funds, Mauritius would not be in the picture, and the U.S. would move to first place.
There is a separate category of foreign investor called ‘private equity’ (PE) firms, whose pattern of ownership is similar to that of hedge funds. PE firms do not operate on the share market, but directly invest in certain existing firms, or acquire them outright; for this reason they are classified as FDI. However, by and large they invest in order to sell out later, making large capital gains. To take just one example, the American PE firm Warburg Pincus invested $292 million between 1999 and 2001 in Bharti Tele-ventures; it sold the bulk of its stake in August 2004-March 2005 for $1 billion, while retaining a stake worth $700 million.76 (This example underlines how, while Indian firms have emerged as important gainers from the privatisation process, foreign financial investors have been able to corner a large share of the rewards by investing in such Indian firms in the privatised sectors.) During January-December 2007 PE investment in India (excluding outright acquisitions) was reported to be over $8 billion.77
Foreign investors have lobbied successfully for more sectors to be opened to them, such as the real estate and debt markets; commodity futures markets are soon to follow. In 2006, the growth in real estate rentals in four Indian cities was among the fastest in the world: Mumbai and Delhi, with 50 per cent and 33 per cent growth, respectively, ranked second and third. Bangalore and Hyderabad, with 25 per cent and 23 per cent growth, were in the top 12.78 Returns are reportedly 20-25 per cent a year. Naturally, this attracted large foreign capital. J.P. Morgan estimates that an annual $2-3 billion is committed for the next several years from PE investors for Indian real estate projects.79 Nearly two dozen U.S. private equity funds are reported to be raising money for investment in Indian real estate. Indian firms have also been making large external commercial borrowings for the real estate sector; when this route was shut off by the authorities, who feared a speculative bubble in the sector, the firms began disguising the borrowings as FDI. Foreign investors would borrow at low interest rates in the international capital market and lend to Indian real estate firms at interest of 13-15 per cent; the latter, earning much higher returns, could easily service this debt. Assocham claims that the turnover of the real estate sector will rise from $15 billion at present to $90 billion in 2015, at which point it expects FDI to be $15 billion.
The summit of the entire financial network is Mumbai, which is now being promoted officially as an international financial centre (IFC). The project of making Mumbai an IFC is a striking example of the fetishization of ‘growth’, and of the parasitic relation of this ‘growth’ to the economy as a whole. In 2003, the U.S. consultancy firm McKinsey put out a 32-page paper chalking out the changes required in Mumbai’s urban infrastructure, lay-out, and urban policies to make it a suitable host for international finance. The plan called for some Rs 500 billion to be provided by the exchequer, and the remainder from private investors; it envisioned a block-by-block demolition and reconstruction of the city. On the basis of this unsubstantiated document, the state government appointed a secretary-level officer to coordinate the work of various departments and agencies in implementing the McKinsey Vision. Various elements of the Vision have been implemented since: for example, the Urban Land Ceiling and Regulation Act, 1976, has been repealed.
More importantly, the Central government appointed the High Powered Expert Committee (HPEC) on Making Mumbai an International Financial Centre. The HPEC argues that the aim must be to make Mumbai a Global Financial Centre. Today, a firm (or even a Government) anywhere in the world wishing to raise funds from the world capital markets generally goes to merchant banks headquartered in London, New York, or Singapore. Housed in these cities are also firms that offer a range of services: international consultancy, tax management and accounting, management of assets and personal wealth. In these cities’ share markets, investors trade the shares of firms from around the world; in their foreign exchange markets the world trades in currency, including in complex instruments called currency derivatives. All these activities earn fat incomes. The HPEC argues that India can earn these incomes by making sweeping changes not only in Mumbai but in the entire economy in order to attract the full range of operators in international financial markets to set up shop in Mumbai and provide the range of international financial services. The HPEC envisions a large influx of expatriates, with Indians accounting for just 25-30 per cent of the employees in the sector.
In 2007, the HPEC laid down an elaborate and extravagant set of 48 requirements for making the city an IFC. Among them:
i. Achieve and maintain an average GDP growth rate of 9-10 per cent (from 2009 it is to be maintained at 10 per cent).
ii. Reduce the consolidated fiscal deficit of the Centre and states from over 8 per cent to 4-5 per cent of GDP by 2009. Reduce the debt-to-GDP ratio from 80 per cent at present to 65 per cent by 2009.
iii. Implement full capital account convertibility by the end of 2008.
iv. Eliminate the securities transaction tax by 2007 and stamp duties by 2008.
v. Open up investment in Government debt to foreign buyers without restriction. Remove the requirement that banks must invest a certain proportion of their assets in Government debt (the Statutory Liquidity Ratio).
vi. Open up Indian capital markets to hedge funds and other such speculative, unregulated foreign funds immediately.
vii. Focus the monetary authorities (the RBI) exclusively on managing the key short-term (‘base’) interest rate by 2009-10.
viii. Transfer all regulation/supervision of any type of organised financial trading from the RBI to the Securities and Exchange Board of India (SEBI) by 2008.
ix. Allow unrestricted entry of global legal and accounting firms operating in international financial centres by 2008.
x. Withdraw Government from ownership of financial firms, including public sector banks (PSBs); by 2008 its stake in PSBs should fall below 49 per cent, and 33 and 26 per cent in the following two years.
xi. Decontrol the opening of bank branches by domestic banks (immediately) and foreign banks (by mid-2008).
xii. Appoint or arrange to elect a City Manager, bring the governance machinery of the city under his/her full control, and establish an independent financial base for this post.
The scale of the HPEC’s demands is breathtaking. Its head, an ex-World Bank official, explained in an interview: “If I have to give one piece of advice to Prime Minister Manmohan Singh, I would ask him to let go of Government control over the financial sector”.80 In fact, however, the HPEC’s recommendations demand that the entire economy be subordinated to the needs of the international financial-speculative sector; these changes indeed extend to the political sphere (the creation of an all-powerful City Manager). All Government financial sector activity for the purpose of developing or protecting the rest of the economy is barred – for example, Government borrowing (fiscal deficit) for any developmental need. With the exit of the Government from bank ownership, it would be impossible to direct any of these banks’ lending toward sectors such as agriculture, small scale industry, and depressed social sections. Revenue could not be raised from the booming speculative activity in shares or real estate. Most of all, all Government control on capital flows would be abolished. The entire economy would be left the mercies of the activities of a handful of speculative operators.
The HPEC went far beyond its brief (which was to draw up a plan to make Mumbai a regional financial centre, like Dubai), and it is not clear how many of its recommendations will be implemented, particularly in the context of the current slowdown in the global economy and the Indian economy. However, the Finance Minister in his 2007-08 Budget speech said that “It is my hope that we would be able to build a consensus on the key recommendations of the Committee, promote a world class financial centre in Mumbai, and realise the objective of making ‘financial services’ the next growth engine for India.” (emphasis added)
Prime among the HPEC’s recommendations is the implementation of complete capital account convertibility (CAC), treating foreign capital on identical terms with domestic capital and giving both complete freedom to flow in and out of the country.
Of course, international financial capital wants CAC, and whether or not Mumbai succeeds in becoming an IFC, the project will succeed promoting the idea. Already there is a considerable extent of CAC: most restrictions on foreign investment in India have been removed, restrictions on Indian firms borrowing abroad have been relaxed, most restrictions on foreign remittances have been removed, individuals have been allowed to send out $200,000 a year, and most importantly, Indian firms have been allowed to invest vast sums abroad.
Even this partial CAC has subjected the economy to buffeting by volatile flows of foreign capital, as we have discussed earlier. Once a country has an open capital account, it loses control of either its exchange rate or its money supply. Either way, it loses control over its domestic economy.
To repeat the earlier discussion, there have been huge inflows of foreign capital in different forms. These inflows tend to make the value of the rupee rise vis-a-vis the dollar. When this happens, the dollar price of Indian exports increases, and the rupee price of its imports falls, hurting India’s exports and increasing its imports. So the RBI has been trying to prevent the rupee from appreciating by buying up dollars from the foreign exchange market. These purchases have swollen the foreign exchange reserves from $107 billion in March 2004 to $265 billion at end-November 2007. These reserves are invested abroad in instruments such as U.S. government debt; that is, they become part of the giant net financial transfers worldwide from the developing economies to the developed countries. Since the return (to India) on such investment of the reserves is far lower than the return to foreign investors on their investment in India, this amounts to a bleeding of the country. In a period of rising foreign investments this may not show up as a net outflow of capital; instead it will show as a growing foreign ownership of domestic assets.
Further, when the RBI buys foreign exchange, it releases a corresponding amount of rupees into the economy. Banks, flush with funds, increase their lendings. Worried that foreign inflows could lead to inflation, the Government has been spending huge sums on ‘sterilising’ these inflows (i.e., selling debt instruments that soak up the addition to the domestic money supply created by these flows). The Government has to pay out vast sums as interest on these debt instruments: a sum of Rs 139.58 billion has been budgeted for interest payments on these instruments in 2008-09. This sum, a burden imposed on the country by foreign inflows, is comparable in size to the Rs 160 billion that the Government has allocated for the much-trumpeted National Rural Employment Guarantee Scheme in 2008-09; yet it has attracted virtually no comment. Even after issuing these instruments, as well as compelling banks to hold some of the inflows as cash, the RBI has neither been able to mop up all the inflows nor to mop up the entire increase in domestic money supply. This has led to steady appreciation of the rupee as well as a surge in bank credit over the past few years.
Apart from these costs, there is the continuous possibility of a sudden flight of capital from the country – the catastrophe experienced by so many countries in Asia and Latin America. Even under the existing foreign exchange regime, the effects of a sudden flight of capital would be severe: the rupee value would plummet, the consequently soaring prices of imports would jack up domestic prices, the central bank in a desperate attempt to stem the outflow would hike interest rates steeply, stalling economic activity. The overwhelming majority of the people, who have never had anything to do with share markets, and never enjoyed a paisa from the boom, would find themselves plunged into economic depression by forces outside their control.
At the reduced rate of the rupee, and with the overall depression of domestic economic activity, Indian assets would become wonderful bargains for foreign investors, strengthening foreign domination over the Indian economy. All this would be so even under the partial CAC existing; under full CAC, the outward flight of capital would be even greater, as the Indian elite could then quite legally send the their entire assets abroad, and foreign investors could speculate on the value of the rupee more directly and to a much greater extent.
While the current downturn in the economy might slow the march toward CAC, in the existing framework it is not simple for the Indian authorities to reverse that march. For any attempt to check inflows or outflows would be taught a swift and brutal lesson by foreign investors. The manner in which the stock market crashed with the entry of the UPA government in 2004 (only to revive once the new government propitiated foreign investors with massive gifts such as the scrapping of long term capital gains tax), and the manner in which FIIs humiliated the RBI governor when he talked vaguely of mild checks on foreign inflows, are a foretaste of the treatment foreign speculative capital will mete out to any attempt to restrict its movements. The larger the stock of foreign speculative capital in the country, the larger would be the effect of its flight. The present value of the stock of such capital is well over a quarter of India’s GDP. Hence only a State and social order prepared to accept such shocks as the temporary price of longer-term growth would be able to act against foreign speculative capital.
Unlike the commodity-producing sector or many services, financial sector activity as such creates nothing of use to the people; one cannot eat a financial service or enjoy it for its own sake. Its only rational role is to serve the sectors producing useful goods and services. Yet we find that the dominant school of thought treats the growth of the financial sector as an end in itself, to be promoted without reference to the benefit to, or effect on, the rest of the economy. The disproportionate, indeed frenzied, growth of the summit of India’s financial sector, even as the bulk of the producers in agriculture and small industry are kept out of the formal financial sector and starved of capital, strikingly illustrates the disarticulation of the entire economy and the continued subjugation of the productive sphere to mercantile and speculative capital.

Notes:
1. At the same time, in recent years the corporate sector has increasingly relied on their retained profits, the share market and foreign borrowings for its requirements of funds; this has deprived banks of a large share of the credit market, and driven them further in the direction of lending to consumers. (back)
2. Economic Times, 23/4/07. (back)
3. Business Standard, 16/3/07. (back)
4. Times of India, 13/2/08. (back)
5. Another factor in the slowdown was the appreciation of the rupee, which led to a slowdown in exports. (back)
6. EPW Research Foundation, “Increasing Concentration of Banking Operations”, Economic and Political Weekly, March 18, 2006, Table 5. The number of accounts in semi-urban areas too shows a fall. (back)
7. Reserve Bank of India, Annual Report, 2006-07. The semi-urban and urban population accounted for the remainder of the deposits and credit. (back)
8 .R. Ramakumar and Pallavi Chavan, “Revival of Agricultural Credit in the 2000s: An Explanation”, EPW, December 29, 2007. (back)
9. RBI, Report of the Technical Group to Review Legislations on Moneylending, 2007. (back)
10. Bank credit for micro-finance in 2005-06 was just one-fortieth the institutional credit disbursed to agriculture that year. Economic Survey, 2006-07. (back)
11. Andy Mukherjee, “High interest rates to hit demand for investment”, Bloomberg, 7/2/08. (back)
12. Quoted in Times of India, 26/10/05. (back)
13. “Banks in no hurry to hike rates for large companies despite RBI’s prodding”, Economic Times, 17/10/05. (back)
14. RBI, Annual Report, 2006-07. (back)
15. NCEUS, Financing of Enterprises. (back)
16. Indeed, small businesses which are vendors to big firms are generally forced to extend them interest-free credit; the big firms extract this by simply not paying their bills for months. (back)
17. Deposits would be higher because the head offices of the major firms would be in places such as Mumbai; hence even if profits were made on the basis of activity in Jharkhand or Orissa, funds would flow into a Mumbai bank account. It is true that credit may also be issued in Mumbai for investments that are to take place in Jharkhand or Orissa; nevertheless economic activity in Mumbai would stand to gain from the entire flow. (back)
18. Carol Upadhya, “Employment, Exclusion and ‘Merit’ in the Indian IT Industry”, EPW, 19/5/07. (back)
19. Anirudh Krishna and Vijay Brihmadesam, “What Does It Take to Become a Software Professional?”, EPW, 29/7/06. (back)
20. One research report based on a survey estimates that each IT job generates an additional 1.4 jobs in other sectors. CLSA Asia-Pacific Markets, Chain Reactions:Indian IT’s Impact on Economy, Consumption and GDP, February 2007. (back)
21. CLSA, op. cit. (back)
22. Business Standard, 30/9/07. (back)
23. A Department of Telecommunications study of 2004 found that most of the domestic telecom equipment manufacturers, and even the state-owned undertaking ITI, which till recently was the major equipment manufacturer, had become merely ‘traders’ by importing the equipment and supplying it to the service providers. – Sunil Mani, “The Dragon vs the Elephant: Comparative Analysis of the Innovation Capability in the Telecom Industry of China and India”, EPW, 24/9/05. (back)
24. Economic Times, 27/6/07. (back)
25. Quoted in Paul Baran, The Political Economy of Growth, Indian edition, 1958, p. 229. (back)
26. Economic Times, 18/2/08. (back)
27. Sunanda Sen and Byasdeb Dasgupta, “Labour under Stress: Findings from a Survey”, EPW, 19/1/08. (back)
28. Baran, op. cit., pp. 230-31. (back)
29. These figures are cited in Special Correspondent, “Posco deal: uneven playing field?”, Hindu, 19/8/05; Shankar Gopalakrishnan, “Posco: blessing or curse?”,Economic Times, 24/12/07; Aditi Roy Ghatak, “Posco venture: capital investment or exodus?”, Hindu, 23/8/05. (back)
30. Gopalakrishnan, op. cit. (back)
31. “MNCs can’t get mines on a platter: States”, Business Standard, 20/12/07; emphasis added. (back)
32. People’s Union for Democratic Rights, Delhi, Through the Lens of National Security, January 2008. (back)
33. Rahul Goswami, “Outpatient Inpatient”, Hindu, 27/1/08. (back)
34. “India’s healthcare spending to cross Rs 200,000 crore [Rs 2 trn.] by 2012”, Business Standard, 6/3/07. (back)
35. “Medical tourism: Heartburn in the U.S.”, Times of India, 18/12/05. (back)
36. Ravi Duggal, “Public Health Expenditures, Investment and Financing under the Shadow of a Growing Private Sector”, in Gangolli, Leena, Ravi Duggal, and Abhay Shukla, Review of Healthcare in India, 2005; citing a study by Indian Council for Research in International Economic Relations (ICRIER). (back)
37. Duggal, op. cit. (back)
38. Private final consumption expenditure from National Accounts data. (back)
39. Duggal, op. cit. (back)
40. Hindu, 12/1/08. (back)
41. Sandhya Srinivasan, “India as a research site”, paper presented at meeting of Centre for Social Medicine and Community Health, 2007. (back)
42. Times of India, 22/10/05. (back)
43. Srinivasan, ibid. (back)
44. “Maharajahs in the shopping mall”, Economist, 2/6/07. (back)
45. Times of India, 8/2/07. (back)
46. Business Standard, 9/3/07. (back)
47. This is a low figure: the Ambanis are said to have spent $250 million on six private jets. – Business Standard, 25/11/07. (back)
48. Economic Times, 25/5/07; Business Standard 1/2/08. (back)
49. The Economist (10/3/07) puts the percentage at 1 per cent; the New York Times (reproduced in the Hindu, 9/5/07) quotes an official of GMR Infrastructure who puts it at 3 per cent. (back)
50. Economic Survey, 2007-08. (back)
51. Economic Times, 15/11/07. (back)
52. “India’s airlines: losing money, buying planes”, New York Times (reproduced in the Hindu, 9/5/07). (back)
53. Sreelatha Menon, “Cars or scars?”, Business Standard, 24/1/08. Average speed in Delhi fell from 20-27 kmph in 1997 to 15 kmph in 2002 and 10 kmph now; in Mumbai it fell from 38 kmph in 1962 to 15-20 kmph in 1993; in Chennai, it is 13 kmph; and in Kolkata 7 kmph. -- Praful Bidwai, “Small cars, big problems”,Frontline, 15/2/08. (back)
54. Bidwai, op. cit. (back)
55. “Booming economy gives rise to mall mania”, Financial Times, reproduced in Business Standard, 23/12/07. (back)
56. McKinsey Global Institute, “The Bird of Gold: The Rise of India’s Consumer Market”, cited in “The coming boom”, Economist, 5/5/07. (back)
57. With Rs 45, one can buy more goods in India than one could buy of equivalent goods in the U.S. with $1 (which was worth Rs 45 at the exchange rate in 2004-05). Thus the purchasing power of Indian incomes is not reflected when they are converted into U.S. dollars at the exchange rate. To make international comparisons, figures are converted into an invented measure called Purchasing Power Parity dollars, on the basis of internationally comparable price levels. In December 2007, the International Comparison Programme released its latest estimates of PPP for 2005, on the basis of which India’s nominal GDP of $778.7 billion was estimated to be $2.34 trillion in PPP terms. (back)
58. The classification of mobile telephony as a luxury may be questioned on the ground that it has been adopted by large numbers in the urban areas: the number of mobile subscribers has reached 234 million by the end of 2007. However, unlike the case of commodities and services such as food, clothing, fuel, lighting, housing, education, and medical care, it is a service for which demand as such is generated by the suppliers themselves through heavy advertising, promotional schemes, ‘peer pressure’, and the like. The spread of mobile telephony in India is a complex social phenomenon worth study (the reasons for various sections becoming subscribers are diverse; hardly any mention is made of the pressures, economic and social, to own a mobile phone). The number of connections is not an accurate gauge of the actual usage: Much of the recent addition to the subscriber base has been of sections with low average revenues per user. The ratio of connections in urban areas to rural areas remains very high: with three-fourths of the population, rural India has less than one-fourth the telephone connections. The most profitable segment to the service providers is, of course, those with large disposable incomes, particularly among the youth. (back)
59. Quoted in C.P. Chandrashekhar, “To the market this March”, Frontline, 26/3/04. The minister also acknowledged with disarming candour that market manipulators had driven down prices of public sector shares in the days before disinvestment, in order to pick up the disinvested shares at low prices. When asked who the manipulators were, the minister said, “I have told them not to reveal. They realised what they were doing was not right.” He implied that some of the financial advisors to the disinvestment were themselves involved. However, he ruled out punishing them: “Punishing will lead to the collapse of the market.” –Outlook, 22/3/04. (back)
60. V. Sridhar, “Scam accounts”, Frontline, 6/10/06. (back)
61. In fact there is no subsidy on petroleum products as a whole. Central and state governments taxes on petroleum products amounted to around Rs 1.8 trillion in 2007-08. Petroleum marketing companies thus receive only a portion of the retail price of petroleum products. The loss that these companies make on sale of petroleum products could be eliminated simply by reducing the tax on them. Instead, this marketing loss is displayed by the Government as a ‘subsidy’ being paid to benefit the common man. (back)
62. Independent Commission on Banking and Financial Policy, Interim Report, April 2005. (back)
63. Receipts Budget 2008-09. (back)
64. Menon, op. cit. She cites a 2004 World Bank study as its source. (back)
65. “Santa Claus visits the Tatas”, Telegraph, 30/3/07. (back)
66. P. Sangameshwaran, G. Seshan, Bijoy Kumar, “What drives Tata Motors?”, Business Standard, 22/1/08. (back)
67. The AMP claims that the automotive industry employs 200,000 in vehicle companies, and 2,50,000 in component companies; no details are provided, and both figures look dubious. It goes on to claim vaguely that another 10 million are employed “at different levels of the value chain – both backward and forward linkages.” This remains a mystery; at any rate the claimed proportion of indirect to direct employment is over 22:1, surely fanciful. The GDP claims are inflated by using a figure of industry sales, rather than value added in the industry. (back)
68. “Globalisation, capitalism and inequality”, Economic Times, 9/7/07. (back)
69. “Inclusive growth”, India: Selected Issues, International Monetary Fund, February 2008. (back)
70. NCEUS, Report on Conditions of Work, p. 7. (back)
71. A.V. Banerjee, Thomas Piketty, “Top Indian Incomes, 1956-2000”, June 2003. (back)
72. NSS Report no. 500. As mentioned above, the households covered under the NSS evidently do not include the billionaire households. S. Subramanian and D. Jayaraj, “The Distribution of Household Wealth in India”, UNU-WIDER, October 2006, estimates that the Business Standard list for 2003, containing 178 richest households, accounted for 2 per cent of the country’s estimated wealth. (back)
73. That is, the sum of the assets of the NSS households and those of the billionaire households. (back)
74. “World’s largest hedge fund firm now in India”, Business Standard, 26/2/08. (back)
75. Statement in Lok Sabha by the Union Minister of State for Finance, quoted in “Five FIIs now account for 60 per cent of PNs”, Business Standard, 8/9/07. (back)
76. “A new frontier”, Economist, 10/9/05. (back)
77. James Winterbotham and Sridar Swamy, “M & As: A year of adventure for India Inc abroad”, Hindu Business Line, 7/3/08. (back)
78. Economic Times, 16/4/07, quoting a survey by the firm Cushman and Wakefield. (back)
79. Business Standard, 6/4/07. Emphasis added. (back)
80. Business Standard, 6/4/07. Emphasis added. (back)

http://rupe-india.org/44/private.html

Poverty and Social Exclusion in India

World Bank (2011), Poverty and Social Exclusion in India, the World Bank: Washington DC

Despite India’s record of rapid economic growth and poverty reduction over recent decades, rising inequality in the country has been a subject of concern among policy makers, academics, and activists alike.

Poverty and Social Exclusion in India focuses on social exclusion, which has its roots in India’s historical divisions along lines of caste, tribe, and the excluded sex, that is, women. These inequalities are more structural in nature and have kept entire groups trapped, unable to take advantage of opportunities that economic growth offers. Culturally rooted systems perpetuate inequality, and, rather than a culture of poverty that afflicts disadvantaged groups, it is, in fact, these inequality traps that prevent these groups from breaking out. Combining rigorous quantitative research with a discussion of these underlying processes, this book finds that exclusion can be explained by inequality in opportunities, inequality in access to markets, and inequality in voice and agency.

The report is organized around three chapters, in addition to this overview, each one dealing with an excluded group: Scheduled Tribe (ST), Scheduled Caste (SC), and women. The objective is to provide a diagnostic of how the three excluded groups under analysis have fared along various development indicators during a period of rapid economic growth in the national economy. In seeking this objective, the report also addresses correlates and the processes that explain how and why these groups have fared the way they have over a period of time. Chapter two in this report focuses on the Adivasis or STs. In most analyses, this topic is addressed after the Dalits, but the author has placed it first for analytical and organizational purposes. There are two reasons for this: tribal groups are not strictly within the caste system, and the bonds of rituals do not affect their relations with the world in general. Also the report shows that outcomes among Adivasis are among the worst, despite considerable variation across places of residence and tribal groupings. Finally, Chapter three focuses on Dalits, a term that has united the SCs in a process that is more empowering than the process of identification by individual names, which have been and continue to be associated with ritually impure occupations.

See: http://publications.worldbank.org/index.php?main_page=product_info&products_id=24029

29/09/2011

Airfare hike: Ministry asks DGCA to examine the matter

New Delhi: With high festive season demand pushing up airfares, aviation regulator DGCA has been asked by civil aviation ministry to examine if it could take some steps provide any relief to air travellers.

Airfare hike: Ministry asks DGCA to examine the matter

"I have asked DGCA to use its powers and look into the matter, although beyond a point, we cannot do anything," civil aviation minister Vayalar Ravi said replying to a question on hiking air fares by airlines ahead of the festival season. Noting that there is a "flexible mechanism" that governs air fares, he said the regulator would examine the issue as it affected the travelling public.

The fares of almost all major airlines have risen by an average of ten per cent due to the festive season, though sources in the airline industry maintain that due to high passenger traffic, the low-fare buckets were getting filled up fast leaving only high fare options.

The fare monitoring committee of the directorate general of civil aviation, set up a year ago, was already analysing the fare data on a daily basis, the sources said. Asked to comment on planned shut down of low-cost carrier Kingfisher Red, Ravi refused to give a direct reply but said soaring prices of aviation turbine fuel (ATF) was a matter of concern for entire aviation industry.

Airfare hike: Ministry asks DGCA to examine the matter

Expressing concern over rising jet fuel prices, Ravi said he would soon write to state governments to reduce sales tax on ATF, though he had made similar requests earlier too. "ATF price is a major challenge facing the aviation industry. ATF is going up because of increase in crude prices.

"In India, sales tax on ATF is affecting the industry. I have already written to state governments to reduce the sales tax on it. I will write to them again," Ravi said. Asked as to when the next meeting of the Group of Ministers on Air India will be convened, he said it will take place soon.

Source: PTI

29/09/2011

Fully booked: Puja high for Bengal tourism

Kolkata: Private operators and hoteliers are ecstatic over full bookings for the coming festive season, heralded in West Bengal by Durga Puja, an occasion that draws hundreds of expatriates back home.

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Fully booked: Puja high for Bengal tourism

"This puja we hope to do better business than in the last three years. All the hotels and tourist destinations are fully booked. It is a chock-a-block situation this year," said an elated Raj Basu, chairman, Eastern Himalayas Travel and Tour Operators' Association (Ehttoa).

The usual tourist destinations in north Bengal are the hill towns of Darjeeling, often referred to as the Queen of the Hills, Kalimpong and Kurseong, apart from forests in Jaldapara, Dooars and Gorumara.

Sunderbans, the world's largest mangrove forest, with its wild beauty, Royal Bengal Tigers and winding boat rides also attracts a large number of visitors.

"As per recent reports, all hotel rooms are fully booked in the northern part of the state. Tour operators are having a tough time in adjusting the flow of tourists. The numbers have gone up substantially," said Deepak Parekh, member, Travel Agents Federation of India, eastern zone.

Fully booked: Puja high for Bengal tourism

The tour operators are expecting a 75 percent jump in tourist inflow to north Bengal compared to the last three years.

The signs are positive. North Bengal has escaped major damage in the quake, peace is back in Darjeeling and the government is formulating special packages for drawing tourists to the Sunderbans.

West Bengal becomes a popular tourist destination during October and November when around 100,000 foreigners and visitors from other parts of the country turn up in the state to drench themselves in the spirit of autumnal festivities that include the five-day Durga Puja festival followed by Diwali and Kali Puja.

This year, Durga Puja begins Oct 2.

Fully booked: Puja high for Bengal tourism

Darjeeling with its varied landscape and spectacular beauty has been a favourite and affordable destination not only for Bengalis but also for people across the globe.

Tourism in Darjeeling, which accounts for substantial revenues for the state tourism industry, has been badly hit since 2008 when the Gorkha Janmukti Morcha (GJM) revived a violent stir in support of forming a separate state of Gorkhaland.

Now the internationally famous hill resort is hoping to return to its good old days after the inking of a peace accord in July.

Parekh confessed that tour operators have been receiving hundreds of anxious calls about the conditions in Darjeeling from tourists who have done advance booking for the Durga Puja season after a 6.8-magnitude earthquake rocked large parts of northern and eastern India Sep 18.

Fully booked: Puja high for Bengal tourism

"We are monitoring the whole situation but as of now there have been no major cancellations," Parekh told IANS.
Basu said the rush of tourists for Durga Puja is scheduled to start Thursday.

Parekh's concerns were echoed by Jeet Pradhan of Janmukti Hotel Owners Association, the largest hotel association in North Bengal.

"Though there have been no major cancellations, we are concerned," said Pradhan.

During the month-long festive season, north Bengal hoteliers expect 15 days of full occupancy and 15 days of partial occupancy.

State Tourism Minister Rachpal Singh said nothing much should be read into the calls being made by tourists.

"Actually this is due to the temporary problem. Most of the roads have opened there and we are working tirelessly to repair the damage," said Singh.

With all schools and most of the offices closed during the four days of Puja, people prefer short tours to various destinations.

Fully booked: Puja high for Bengal tourism

The Sunderbans affairs ministry is also rolling out the red carpet.

"We have ensured that more motor boats and launches are run during this season as a lot of tourists come just after Puja. This tourist season extends till the end of November. We have taken all steps for the security of the tourists," Sunderbans Development Minister Shyamal Mondol said.

"We are getting a good number of bookings for the post-Durga Puja season. Most of the house boat-type launches which house tourists during this season are fully booked," said Debjit, a tour operator.

Going by the slogan of Chief Minister Mamata Banerjee of turning Kolkata into London, the state tourism industry is introducing roofless double-decker buses, a hot air balloon service and helicopter services to attract more tourists.

"We are planning to bring 10 Volvo buses, two roofless double-decker buses during this Puja as special attraction. We are also planning hot air balloon services and helicopter services for the tourists," said Singh.

Source: IANS

28/09/2011

India for zero tolerance on corruption: Patil

India is committed to greater transparency and accountability in governance as also to the policy of “zero tolerance” towards corruption, President Pratibha Devisingh Patil said Wednesday.

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India for zero tolerance on corruption: Patil

Quoting Mahatma Gandhi who termed corruption as a "moral failure", the President said legislation alone would not be enough to combat corruption. To tackle the menace, it also requires looking at individual behaviour as well as societal norms through the medium of education, creation of awareness and moral regeneration.

"We are committed to greater transparency and accountability in governance, as also to a policy of 'zero tolerance' towards corruption," she said after inaugurating the Seventh Regional Conference of the ADB-OECD Anti-Corruption Initiative for Asia and the Pacific Region on 'Building Multidisciplinary Frameworks to Combat Corruption' in New Delhi.

India for zero tolerance on corruption: Patil

"India has an elaborate legal and institutional framework for preventing and combating corruption in public services. We have a well structured system of recruitment, clear and transparent policies of promotion, and elaborate conduct rules for public officials for ensuring the maintenance of integrity," the President said.

She said India ratified the United Nations Convention Against Corruption in May 2011. "It has been a significant step and would facilitate the furtherance of efforts to secure effective international co-operation in tackling trans-border corruption," she said.

The President said while domestic laws were substantially compliant with the mandatory provisions of the U.N. Convention except a couple of Articles, necessary legislations were introduced in Parliament to fully adhere to it.

"...the necessary Legislative Bill has been introduced in Parliament, which relates to the prevention of bribery of foreign public officials and officials of public international organisations," she said.

Source: PTI

28/09/2011

Omar fears rise in militancy if Afzal is hanged

Jammu and Kashmir Chief Minister Omar Abdullah Wednesday said he was worried that the hanging of parliament attack convict Afzal Guru could revive militancy in the state.

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Omar fears rise in militancy if Afzal is hanged

"I have to be concerned about the hanging of Afzal Guru. It has implications not just for the state but for the centre too," he told Headlines Today news channel.

He noted that a generation of militants was born in Kashmir following the execution of Jammu and Kashmir Liberation Front (JKLF) leader Muhammad Maqbool Bhat in 1984.

"I cannot and will not forget that an entire generation of militants was born because of the hanging of Maqbool Bhat. I have to be concerned that Afzal Guru's hanging can once again revive militancy at a time when it is down," Abdullah said.

"I am not in favour of the death penalty. It has not served as a deterrent for either murders or terrorism," he said.

The state assembly was set to debate the resolution seeking clemency for Afzal Guru Wednesday but this did not happen due to disruptions.

Abdullah also questioned the policies of some political parties on similar issues like clemency for people on death row.

Omar fears rise in militancy if Afzal is hanged

"While it is okay to ask clemency for Rajiv Gandhi's killers and while it is okay also to ask mercy for (Khalistani terrorist Devinder Pal Singh) Bhullar, why is it wrong for J and K to even discuss and debate clemency? Is it because Afzal Guru is a Kashmiri Muslim?" he asked.

He also questioned why Jammu and Kashmir is constantly called upon to prove that they are a part of India when no other state is asked to do the same.

"Death sentences should satisfy legal needs, not public perception," he said, adding that death sentence only converts convicts into martyrs.

"It is better to put them in jail for the rest of their lives because then most people will forget about them," he suggested.

The chief minister also took a dig at the separatists and questioned their so-called desire not to seen Afzal Guru hang.

"I can tell you that privately they will be thrilled if he is hanged because it will give them a boost," he said.

On his tweets on controversial issues, he said: "I will be tweeting less on controversial issues but there is no way I am quitting Twitter. It is an effective medium to communicate. I will not betray my 60,000 followers."

Source: IANS

28/09/2011

Uproar in J-K Assembly over Afzal Guru clemency issue

Srinagar: Uproarious scenes were witnessed in the Jammu and Kashmir Assembly on Wednesday over a resolution seeking clemency for Afzal Guru, who was convicted of conspiracy in connection with the December 2001 attack on Parliament.

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Uproar in J-K Assembly over Afzal Guru clemency issue

A resolution seeking clemency for Guru was submitted by Engineer Rashid, an independent MLA in the 87-member state Legislative Assembly.

As soon as the House convened, Opposition MLAs, primarily from the Jammu region, stormed into the Well of the House demanding that the resolution should not be tabled and taken up for discussion.

Opposition MLAs hold view that the Assembly has no power to discuss the verdict by the Supreme Court of the country.

Guru was awarded death sentence by a court in 2002 after being convicted on charges of conspiracy to attack the Parliament, waging war against the country and murder.

Uproar in J-K Assembly over Afzal Guru clemency issue

The Delhi High Court upheld the death sentence in 2003 and his appeal was further rejected by the Supreme Court two years later.

Following this, Afzal Guru filed a mercy petition with the President, who forwarded it to the Home Ministry for its comments.

A group of gun-and grenade-wielding militants had stormed the Parliament premises in December 2001, but were stopped by security personnel.

The attack led to the death of a dozen people, including six policemen, a civilian and five militants of the Lashkar-e-Toiba (LeT).

Source: ANI

28/09/2011

High Court upholds Singur Land Act; Tatas lose out

Kolkata: The Calcutta High Court today handed Mamata Banerjee a victory over Tata Motors in the Singur land case, upholding the validity of the Singur Land Rehabilitation Act of the West Bengal government.

High Court upholds Singur Land Act; Tatas lose out

Though the verdict marks the end of a case being fought over the last three months, the battle dates back to the middle of 2006, when Trinamool Congress chief Mamata Banerjee, now West Bengal's chief minister, started agitating against Tatas' global small car project, the Nano, at Singur.

Banerjee has been fighting for the "unwilling" farmers of Singur and their demand for return of 400 acres. But that may still be a long way off.

Today's verdict is in the case filed by Tata Motors challenging the Singur Act, that revoked the lease agreement for 997 acres. There are, however, two other stakeholders, the vendors, who had 290 acres of the 997 acres and the "willing" farmers, who had accepted the compensation for the land.

"Our case will be heard after this verdict," a vendor said. It is the same with the "willing" farmers.

High Court upholds Singur Land Act; Tatas lose out

Both parties challenged the Act on the grounds that it is unconstitutional. The Tatas are likely to go for an appeal now.

Earlier, Justice I P Mukherjee had said during the hearing that he would like to lay guidelines for compensation to Tata Motors, which is left vague in the Singur Act.

The West Bengal government had, however, said that it was willing to compensate Tata Motors, but would not factor in the leasehold value, as the land ownership was with the WBIDC.

Though Tata Motors' sunk cost ranged between Rs 440 crore and Rs 1,400 crore, compensation was not the only issue for the company. The company was challenging the Act itself.

Source: PTI

29/09/2011

2G note didn't reflect my views: Pranab

New Delhi: Finance Minister Pranab Mukherjee Thursday said the controversial note on 2G spectrum sent by his ministry to the Prime Minister's Office had "certain inferences" that did not "reflect his views" and was a "background paper".

2G note didn't reflect my views: Pranab

New Delhi: The government Thursday sought to bury a flaming row over a finance ministry note that linked Home Minister P. Chidambaram to the 2G scandal, with Finance Minister Pranab Mukherjee denying the note reflected his views on the controversial 2008 spectrum allocation.

In a bid to show that the Congress-led United Progressive Alliance (UPA) was united, Mukherjee read out a prepared statement outside his North Block office. He was flanked by a visibly sullen Chidambaram and cabinet ministers Salman Khurshid and Kapil Sibal.

"Apart from the factual background (on spectrum allocation), the paper (note) contains certain inferences and interpretations which do not reflect my views," Mukherjee said.

The note sent to the Prime Minister's Office (PMO) by the finance ministry in March suggested that the spectrum allocation could have been auctioned had Chidambaram, as the then finance minister, insisted.

2G note didn't reflect my views: Pranab

Since the note became public, Chidambaram has come under attack for alleged links with the spectrum scandal, which has landed a former cabinet minister and several others in prison.

Chidambaram also faced opposition calls that he should quit.

After Mukherjee spoke, the home minister said the controversy triggered by the note was now over.

He added he was happy with the statement read out by his "senior and distinguished colleague".

Mukherjee's statement came on a day after he again met Prime Minister Manmohan Singh and Congress president Sonia Gandhi, who were desperate to end a crisis that seemed to pit Mukherjee against Chidambaram.

2G note didn't reflect my views: Pranab

In his statement, Mukherjee said the government had sought to prepare "a harmonized note based on facts ... for use by various representatives of the government".

"A group of officers prepared an inter-ministerial background paper which was sent to PMO on March 25," he said.

He said the inferences in the note -- which is what caused the problems for Chidambaram and the government -- did not have his approval.

Mukherjee had until now taken no such categorical stand. He had met Manmohan Singh once in New York and Sonia Gandhi twice but did not divulge the details of their discussions.

The prime minister had already declared that he stood by Chidambaram.

Mukherjee also linked 2G spectrum allocation in 2008 to the earlier National Democratic Alliance (NDA) government led by the Bharatiya Janata Party (BJP).

"The policy of the government in 2007-08 was continuation of the policy adopted in October 2003 and as reiterated by the TRAI (Telecom Regulatory Authority of India," he said.

2G note didn't reflect my views: Pranab

The opposition Bharatiya Janata Party dismissed as "untenable" Pranab Mukherjee's explanation that the controversial note from his ministry on the 2G scam did not reflect his views.

BJP leader Ravi Shankar Prasad said the finance minister did not answer the main question about loot of public money. He accused Home Minister P. Chidambaram and Mukherjee of being busy in their "ego battle".

"It is not your internal matter or ego battle to be settled, you are accused, your role needs to be investigated," Prasad said.

"The contention by Mukherjee that they followed the cabinet decision of the NDA government is equally untenable and baseless," Prasad said.

"That decision stated that spectrum pricing and license must be determined in consultation with the finance ministry, which means a transparent mechanism. The moot question as raised by the officers of the finance ministry is why should spectrum and licensing be allocated in 2007-08 at 2001 price," he said.

Source: IANS

29/09/2011

Pvt bank promoters may be allowed 15% stake

Private sector banks are set to get some relief from the Reserve Bank of India (RBI) on promoters’ stake. The regulator had earlier asked these banks to submit a road map and give a time frame for paring promoters’ shareholding to 10 per cent.

But, the central bank is now in favour of increasing that limit to 15 per cent, according to sources in the RBI. The move comes after the draft guidelines for new banking licences proposed that promoters of new banks float a non-operative holding company (NOHC), which would hold 40 per cent of the paid-up capital of the bank for an initial period of five years. It will then have to reduce its stake in the bank to 20 per cent within 10 years and 15 per cent within 12 years from the date of licensing.

"The plan to allow existing bank promoters to hold 15 per cent stake will ensure a level playing field for all the players," a top official of a private sector bank, who did not wish to be named, said.
This will offer some comfort to private lenders such as Development Credit Bank (DCB), IndusInd Bank, Kotak Mahindra Bank and YES Bank, where promoters' shareholding continues to be high.

According to another private bank official, the RBI move is welcome as it is impossible to dilute large stakes when the markets are so volatile. "We are awaiting clarifications from the RBI on promoters' shareholding before reducing stake further," he said.

The RBI had earlier expressed concern over high promoter shareholding in many private sector banks, though most of these lenders had completed 10 years of operations.

For instance, in IndusInd Bank, which commenced operations in 1994, promoters hold 19.53 per cent stake, while in DCB, which was converted into a scheduled commercial bank in 1995, promoters' shareholding is 23.08 per cent.

Promoters of YES Bank, the youngest bank in the country which began operations in 2003, currently hold 26.5 per cent stake. In case of Kotak Mahindra Bank, the promoter shareholding is 45.5 per cent.

However, sources indicate that for HDFC Bank, the second-largest private sector bank in the country, the cap on promoters' shareholding will not be applicable, as its promoter Housing Development Finance Corporation (HDFC), is a publicly held company. The promoters of HDFC Bank currently have 23.28 per cent stake in the bank.

Source: Business Standard

Volume 4, Number 1 Spring 2009 > Feature Essays

[April, 2009]	[ Printed Version]
Globalization and Exclusion: The Indian Context By P. Radhkrishnan
The concept of social exclusion in India dates back more than three millennia, enforced by the Hindu caste system. Modern India, though, now faces a fresh challenge to its efforts to stamp out institutionalized social exclusion. India sociologist P. Radhakrishnan explains how globalization is reinforcing some of the worst of India’s social problems.

While globalization is a recent phenomenon, social exclusion is both historical and contemporary. Therefore, in order to place globalization in perspective and understand its impact on persistent social exclusions and how it also results in new forms of exclusion, it is important to understand the so-called exclusion debate both in general and in the Indian context.

SOCIAL EXCLUSION
Social exclusion is used here to mean the systematic exclusion of individuals and groups from one or more dimensions of society, such as structures of power and privilege, opportunities and resources.

Exclusion discourse in Europe has generally been concerned with social problems in the labor market thrown up by economic restructuring. It is this economic restructuring, and the resultant social transformation, that dismantled social bonds and support systems, undermined democracy and condemned large numbers of people to life in urban slums and collapsing rural communities, according to Noam Chomsky.

Social exclusion in India cannot be captured by the Euro-centric approach and its labor market framework. The exclusion discourse in Indian society has to be understood against the backdrop of the caste system.

Caste, traditional India’s system of social ordering and control, is the most elaborate form of social stratification ever known. It has dominated the Indian sub-continent for about three millennia, and is also the most exhaustive and obnoxious of all exclusionary systems.

Caste-exclusions are explicit in traditional society. Membership and status are determined by birth; there is a hierarchy of social precedence among the castes; there are restrictions on social and cultural intercourse between castes; castes are segregated and stratified with regard to civil and religious privileges; occupations are caste determined with relatively little choice allowed; restrictions on marriage outside one’s sub-caste help maintain the system. (Ghurye, 1979: Chapter 1).
Caste exclusions are writ large in the Manusmriti, or Laws of Manu, the fundamental work of Hindu law. It defines the duties and occupations ordained for the four chief castes, or Varnas. In its “dos” and “don’ts” it describes the treatment of women, mixed-castes and castes of “low origin,” of which the most despised are Chandalas, the lowest untouchables. The rules are most glaring in the practice of untouchability, and the treatment of certain castes as “unapproachable” and “unseeable.”

As the structure of exclusion in India is very old, and still persists in different forms, at least three strands of exclusion discourse can be discerned, all directed against the discriminatory, oppressive, exploitative and exclusionary practices of the caste system (For an overview of this discourse, see Milton Singer and Bernard Cohn, 1968).

The first are the protest movements that have been a feature of caste society since the sixth century B.C., when Buddhism and Jainism arose in opposition to Brahminism and the supremacy and socio-cultural hegemony of the Brahmins and related caste prejudices.
The Bhakti movements in different parts of the country throughout the Middle Ages, and Veerasaivism in twelfth century Karnataka challenged the established hierarchy of caste in the name of social equality. The Brahmo Samaj founded by Rammohun Roy in Calcutta in 1828 repudiated caste, and established a brotherhood of men irrespective of caste or creed. The Satya Shodak Samaj, or society of truth-seekers, was founded by Jotiba Phule in Poona in 1873 and blamed the Hindu religion for social inequality, and the Brahmins for fabricating “sacred scriptures” to maintain their social dominance; the movement, which is still alive, asserted the worth of man irrespective of caste.

The Hindu reform movement Arya Samaj was founded by Dayananda Saraswati in Bombay in 1875 and seeks to remove birth as the basis of hierarchy. It promoted inter-caste marriages, and encouraged admitting untouchables into mainstream society. Sri Narayana Guru, who was active in Kerala as a socio-religious reformer for four decades beginning in the 1890s, attacked the caste system, especially the supremacy of Brahmins, who had denied low caste Hindus the right to participate in Brahminic Hinduism. He exhorted his followers to reject differences based on caste and to work for the abolition of the caste system.

B.R. Ambedkar, who described the caste system as a gradation of castes forming an ascending scale of reverence and a descending scale of contempt, advocated its outright annihilation. The political culture built by Ambedkar in articulating the socio-political rights of the untouchables culminated in the Constitutional provisions for formal equality to all and special dispensation (affirmative action) to the historically disadvantaged, in particular the Constitutionally recognized Scheduled Castes (SC), otherwise known as Dalits, and Scheduled Tribes (ST).

Second, beginning in the early 19th century, caste came under severe attack by Christian missionaries like William Ward and Abbe Dubois, especially in the context of discrimination against lower castes and women. Ward (1822, Vol.1: 143-44) criticized the caste institution as one of the greatest scourges of Indian society, dooming 90 percent of the people even before birth to a state of mental and physical degradation. Both Ward and Dubois deplored the servitude of women, and their exclusion from learning. In one context Ward observed: “Like all other attempts to cramp the human intellect, and forcibly to restrain men within bounds which nature scorns to keep, this system, however specious in theory, has operated like the Chinese national shoe; it has rendered the whole nation cripples.” (Op. Cit. 64)

Third, from the second half of the 19th century the British administration also showed concern about various forms of exclusion in Indian society. This was mainly in the context of Brahmin dominance, Muslim alienation and the social isolation and backwardness of the lower castes and tribes. As a result, British educational and employment policies came to be characterized by concessions, communal representation and patronage politics.

Since the 1950s, social exclusion in India has assumed a wider connotation, and discourse on it has had greater significance in political rhetoric, and among academics, more recently in writings on women, Dalits and other deprived groups.

Exclusion discourse also gained new meaning in the 1990s with Prime Minister V. P. Singh’s decision to implement the Mandal Commission report, which sought to increase affirmative action programs for the disadvantaged. The discourse now covers a wide range including emancipation politics, national justice and the empowerment of women and backward classes.

The excluded social groups
Those historically excluded in Indian society are broadly several social groups subsumed under the Scheduled Caste and Scheduled Tribe categories, the lower strata of caste-Hindus, women, Muslims and some Christians. Until the Constitution came into force in 1950, exclusion was enforced primarily by the traditional caste-based social order. This practice was legally abolished in the 1950s, though it still persists socially.

The Constitution is, prima facie, anti-discriminatory, anti-exclusionary, anti-exploitative and anti-oppressive. It strikes at the roots of traditional caste and community-based prejudices, hierarchies and inequalities, and provides for legal remedies to reshape social patterns. Effective implementation of its provisions over the last six decades should have ushered in an inclusive, egalitarian society devoid of privileged high castes, despised low castes, entrenched backwardness and exclusionary practices. This has not happened.

EXCLUSION AND GLOBALIZATION
While social exclusion is an extreme form of vulnerability, it is also both a cause and consequence of it. Even as India struggles to grapple with this problem, the impact of globalization has made it worse. The globalization behemoth has added new dimensions to the vulnerability of India’s downtrodden by exacerbating their social exclusion, and making large segments of other social groups also vulnerable and excluded.

But before turning to these issues, it is necessary to place globalization in perspective. One way of understanding globalization is from its etymology. As globalization is “going global” and many things over the centuries have “gone global,” it is pertinent to ask in the context of the ongoing globalization discourse, (a)what has gone global, (b) how it has gone global, (c) why it has gone global, and (d) why it has been causing so much commotion, concern and consternation.

The answer to what has gone global is, as political scientist James Kurth (1999) would have it, that the United States — the sole superpower, “high-technology economy” and “universal nation” — has been leading the drive for globalization.
On how it has gone global, more from Kurth:

“It [the US] has done so by systematically pressing to remove any national barriers to the free movement of capital, goods and services. It has done so through the great international, now global, financial institutions, especially the International Monetary Fund, the World Bank and the World Trade Organization. And it has done so because it has the political, economic and military power to get its way. The triumphalist United States, which has reached the heights of being the sole superpower at the culmination of the “American Century” and at the end of the modern era, now seeks to lead the world into the globalized economy and the post-modern era.”

The answer to why it has gone global is partly evident from the above passage, but, as will be shown later, it is not the economy alone that is globalizing.
As for why it has been causing so much commotion, concern and consternation — it is because unlike the earlier processes, the present one is a gargantuan juggernaut. On this, more from Kurth:

“Globalization is often described as a process: steadily progressing over time, pervasively spreading over space and clearly inevitable in its development. But globalization is also a revolution, one of the most profound revolutions the world has ever known. Indeed, globalization is the first truly world revolution.

All revolutions disrupt the traditions and customs of a people. Indeed, they threaten a people’s very security, safety and even identity. The world revolution that is globalization in some measure threatens the security of every people on the globe.” (Emphasis added.)

It is only to be expected that the impact of such disruption and threat exacerbates the conditions of groups that are already excluded, vulnerable and are at the margins of society. This observation is particularly valid in the Indian context.

FEATURES OF GLOBALIZATION
Despite the accelerated pace of knowledge production under globalization, the nature of these changes and the nature of the related transformations in social and economic relations have not been understood adequately in their complexity and diversity, since many facets of globalization have only begun to unfold. However, it is possible to discern some of its features. These include: increasing economic and market capitalism and economic and market integration at a global level; increasing free global movement of capital, goods and services by removing national barriers, with the IMF, World Bank and WTO as its key instruments; the rise of the knowledge-technology revolution; and the need for countries to be knowledge-driven and market-driven to compete and survive in the new global scenario.

MARKET DISCIPLINE VS. NANNY STATE
All said, globalization is not global integration that breaks barriers among nations by turning the world into a “global village.” On the contrary, it is an insidious agenda for perpetrating the hegemony of one country over the whole world, by force and fraud.

In an interview with the Indian weekly, Outlook (January 3, 2000), Noam Chomsky observed:
“The consensus of the rich and powerful is that the weak and defenseless should be subjected to market discipline, while the rich and powerful should continue to shelter under the wings of the nanny state … The global consensus is achieving its aims of enriching small sectors, dismantling social bonds and social support systems, and undermining democracy — one of the chief goals and consequences, of liberalizing capital flow… disposable people are being removed from society, either left in deteriorating urban slums and collapsing rural communities or sent to prison. Though crime rates have been declining, incarceration has sharply increased, targeting the poor and minorities by various devices, primarily, a ‘drug war’ that’s recognized to be utterly fraudulent by serious criminologists, a consequence of a deliberate social policy designed to remove the superfluous population. Other industrial societies are proceeding along similar paths, though in different ways.”

MARKET CAPITALISM
No matter how one perceives globalization, it is pervasive and brings under its sweep everything indispensable to individuals and societies. It covers culture, consumerism, economy, education, entertainment, media, natural resources, politics, productive forces, religion, society, state and what have you, with the market, knowledge and technology as driving forces.

As globalization necessarily entails the fast-paced development of material and human resources, those developing countries that do not chant the globalization mantra are bound to be left behind by the developed countries. India is one such country.

THE INDIAN CONTEXT
Only a liberalized state can shape and sustain a liberalized economy in keeping with the needs of a growing democracy. The state, by creating and sustaining institutions that strive for equality, social justice and fairness, can cushion the shocks of social dislocation arising from a liberalized economy. But the Indian state has not brought about the required liberalization nor the needed structural transformation.

In the absence of the state liberalizing its activities in vital social areas, economic liberalization has wrought havoc on India’s economy and society. Having now been overrun by the newfangled capitalism of the liberalized economy, practically every state sector is devastated.

If technology, the market and knowledge are seen as the drivers of globalization, India lacks all of them. Indian technology is way behind that of developed countries, and its development is confined to certain regions. The Indian market, whether for labor or commodities, is neither free, fair, nor participatory, as most traditionally excluded groups and many others are not equipped to participate. The state of India’s knowledge industry is not any better.

EXCLUSION IN GLOBALIZING INDIA
Exclusion in the Indian context is complex, widespread and multi-layered. It may be the result of a lack of social and economic opportunity, as in the case of the urban poor, denial of legitimate social space thus causing social segregation and ghettoization, as in the case of the lower castes, or social insecurity, as in the case of Muslims. Of these, the plight of the urban poor and the lower castes is well known. The plight of Muslims was elaborated in the 2008 Sachar Committee report. (Government of India, 2006: 14-15).

There are a great many manifestations of these new types of exclusion: Displacement: Exclusion may be the result of social uprooting by the state, as has been happening to tribal peoples due to development projects, special economic zones and displacement from traditional occupations caused by economic liberalization (read globalization). While such exclusion is not new, the “development project” as part of the globalization mission has accelerated the processes involved. The Sachar Committee dwelt at length on this in the context of economic liberalization and livelihoods (see Government of India, 2006: 21; also Radhakrishnan 2008).

Fragmented labor: Exclusion may also be the result of the disappearance of well-organized industrial structures. Multinational corporations and their compradors in globalization have dismantled and replaced much local industry with business process outsourcing. In the process they have fragmented industrial labor and weakened the organizational ability and bargaining power of the working class.

Educational deprivation: Exclusion also results from denial of access to education and employment, as in traditional Indian society, or lack of access to the education system and occupational structures for various reasons, especially the state’s failure to provide free or affordable education and generate adequate employment opportunities in contemporary India. Whether in the traditional sense, in the context of globalization, or both, the need for universal higher education is a social imperative.

In its Overview, the report of the 1997-99 Task Force on Higher Education in Developing Countries concluded that without more and better higher education, developing countries will find it increasingly difficult to benefit from the global knowledge-based economy. This report, Perils and Promise: Higher Education in Developing Countries, published in 2000, was prepared by the Task Force on Higher Education in Developing Countries, convened by the World Bank and UNESCO. The Task Force brought together experts from 13 countries to explore the future of higher education in the developing world.

India’s gross enrollment for tertiary education is only 9 percent to 11 percent, which is way behind the 54 percent to 85 percent in developed countries. Going by India’s Census 2001, the overall share of graduates in the 20-24 age group is only about 8 percent. Of the six categories into which the Census 2001 classified the Indian population, degree holders in the 20-24 age group account for only 2.3 percent of the total population in this age group among the STs, 3.6 percent among the SCs, 4 percent among the Muslims, 7.4 percent among the Buddhists, 7.6 percent among the Sikhs, 9.8 percent among the caste-Hindus (Hindus excluding SCs and STs), and 11 percent among the Christians.
Given this dismal scenario, and the fact that 54 percent of India’s population is below age 25, it is only too obvious that the state has failed to grapple with the enormous task of educating India’s rising generation in socially equitable and globally competitive ways.

The problems of Indian education center on financing, equity and excellence. As these problems have been confounded by rapid globalization that requires only educated manpower, the traditionally excluded social groups, which are way behind the advanced groups in their access to education, are now victims of a double whammy. Their traditional deprivation keeps them away from education, and the demands of a knowledge-driven society under globalization leave them out of the mainstream because of their lack of education.

Virtual communities: While lack of access to education in itself is a major exclusion of Indian youth from participating in and benefiting from opportunity structures, there are other forms of exclusion that neither the youth nor the elders seem to be aware of. Such exclusions include the educated as well. This refers to increasing participation in web-based virtual communities such as Facebook, Myspace, Orkut and Geni (for family networking) and the subsequent withdrawal from direct, personal interaction with real society. The result is a remaking and redefining of the social landscape. While this may give participants some immediate satisfaction, its effect is surreal, which, if it becomes widespread and an addiction, may gradually make society both morbid and moribund.

CASTE-CLASS OVERLAP
Though exclusion and related vulnerabilities in the traditional Indian context are seen in terms of groups, in the case of globalization it is necessary to go beyond groups and look at vulnerable populations as a broad class or category. A case in point is the devastation of India’s agrarian sector by global companies with the resulting rural impoverishment, indebtedness and rise in farmers’ suicides in a number of regions (see Radhakrishnan, 2006). This impact is not only on traditionally excluded social groups but also on many others, as caste and class overlap to a large extent. For instance, while the majority of the scheduled castes are agricultural laborers, the majority of agricultural laborers are not SCs. Here it is necessary to keep in mind the impact of globalization on rural and urban areas alike, with those in rural areas migrating to urban areas and ending up as insecure street vendors, daily wage workers or vagabonds.

MIGRATION AND MISERY
A case in point here are street vendors. In the absence of reliable data it may be difficult to treat them as part of any one traditionally excluded social group, though studies may reveal that they belong to more than one group.
Going by one account, the total number of street vendors in India is about 10 million, accounting for 2 percent of the total urban population, with Mumbai and New Delhi having around 250,000 street vendors each, Kolkata around 150,000, Ahmedabad and Patna 80,000 each and the rest spread across the country. Though street vendors form a very important component of the urban informal sector in India, and the street-vendor economy absorbs millions in the job market, sustains industries and delivers basic necessities to the poor (Sharit Bhowmick, 2008), by the very nature of their work they are vulnerable and the wretched of the earth:

“Despite their growing number and positive contributions to the urban economy, street vendors are regarded as illegal traders and encroachers. Their illegal status makes them vulnerable to rent seeking by the authorities (police and municipality) and extortion by local mafias. It’s estimated that in Mumbai, around Rs 400 crore is collected as bribes annually from street vendors. In Delhi, a study by Manushi showed that the police and municipality collect Rs 50 crore every month from street vendors and cycle rickshaw pullers.”(Ibid.)

Far from improving their lot, globalization has only added to their misery:
“The opposition to legalizing street vendors comes from several quarters. There are the so-called citizens groups and residents welfare organizations who view them as encroachers on public space; department stores and shopping malls that regard them as competition; and, finally, municipal and police officials who find it profitable to keep them as illegal entities. Despite such opposition, street vendors exist, eking out a precarious living on the margins of the economy.” (Ibid.)

LIVING BEHIND WALLS
The negative impact of fast emerging “gated communities” for the wealthy in urban areas is obvious. Such communities shrink the traditionally available social space to people in general and the excluded in particular. Traditionally, human habitation has been horizontal — at ground level — though social relations involved hierarchies reflected in the geography of spatial habitations. These horizontal habitations created adequate avenues for social interaction, and, when necessary, social mobilization. Those who were not part of such habitations at least had access to the public space. “Gated communities” exclude by definition those outside the gate but also exclude the denizens inside from the dynamics of society and the social interaction such communities cannot provide. This is in some sense a symptom of a dying society.

CONCLUSION
While the foregoing sections have dealt with some aspects of exclusion and vulnerability in the context of globalization, the discussion is far from complete or comprehensive. There are different ways of doing this. One is by revisiting the exclusion discourse in the Indian context that was mentioned briefly at the beginning of this essay.

Keeping that discourse in mind, it is important to point out that in India’s development efforts there has been no coherent appreciation of social exclusion, and no integrated approach to combat exclusion, despite the fact that political rhetoric and policy documents take into account women, ethnic groups, backward classes, scheduled castes and scheduled tribes. Issues such as civil rights, poverty, untouchability, inequality and basic needs are all related to exclusion in some way but this fact is not well appreciated.

Because exclusion is embedded in the way society functions, any approach to overcome it calls for understanding the role of societal processes and institutional structures in creating deprivation and exclusion. This assumes greater significance with the arrival of globalization.

Since the notions of citizenship, and social, civil, and political rights are new to India, markets (whether labor or commodities) are not well developed, and India has hardly anything in the nature of a welfare system or safety net, the exclusion discourse and inclusion approach in India ought to focus on these issues.

Exclusion operates at the level of individual, group, institution, locality, region and so on. It is both cultural and material, and is hierarchical in terms of needs and intensity. Therefore, there is a need for a disaggregated approach in understanding the patterns and processes of exclusion and the nature of the excluded, taking into account historical and contemporary disabilities, and problems of lack of integration of particular groups. Inadequate social and economic infrastructure in areas that have insufficient resources for participation in mainstream development also has been at the root of various “sub-national movements” such as the Jharkhand, Uttarkhand and Bodo-land.

People respond to social exclusion in various ways, ranging from passivity to group action. Because of a long history of fatalism, which is embedded in the caste system, it is more often than not the case that the excluded themselves are not aware of their exclusion, and even if they are aware, they do not act. There is a need to raise awareness of exclusion, leading to mobilization and group action. Disadvantages arising out of exclusion in India take multiple forms — economic, educational, social, political and cultural — and are all deeply rooted in traditional society.

Because combating social exclusion is meant to bring about social integration — a value-loaded term in the context of continuing caste, communal, ideological and political conflicts — one might ask: integration of whom, with whom, how and why? Because the mandate of the Indian Constitution is to usher in a secular, democratic, pluralist and egalitarian society, even though the caste-based social hierarchy still stifles this mandate, the answers to these questions would entail engagement with many related social problems. Central to such engagement is the need to enrich India’s legislative and parliamentary practices, processes and discourses, thus separating religion from politics and governance, expanding the space for effective participation by those at the margins of society and strengthening “social justice” in order to enable the full and healthy growth of democracy.

Because globalization, per se, is not development and has many socially harmful elements, globalization itself needs to be brought within the ambit of development; in which case the emphasis should be on development discourse, treating development as freedom — as Amartya Sen has done. Such a debate has not yet taken place. With globalization only part of a larger development project, its success or failure depends on how different nations draw up globalization road maps in the context of the larger development process. India’s record on this so far has been dismal and disastrous.

P. Radhakrishnan is Professor of Sociology at the Madras Institute of Development Studies, Chennai, India. His email address is prk1949@gmail.com and his official home page is http://www.mids.ac.in/prk.htm.

References
Ghurye, G.S. (1979). Caste and Race in India. Bombay. Popular Prakashan.
Government of India (2006). “Social, Economic and Educational Status of the Muslim Community of India: A Report.”
James Kurth. (1999) “The Templeton Lecture on Religion and World Affairs”. Foreign Policy Research Institute Wire, Religion and Globalization. Vol. 7, No. 7. May.
James Petras and Henry Veltmeyer. (2001) Globalization Unmasked: Imperialism in the 21st Century. Zed Books. London.
Radhakrishnan, P. (2008) “Muslim Backwardness and Sachar Report.” South Asian Journal, No. 19, January-March.
Radhakrishnan, P. (2007) “Academic Freedom in India.” South Asian Journal, No. 18, September-December.
Radhakrishnan, P. (2006) “Farmers’ Suicides in India: Some Sociological Reflections.” South Asian Journal. No. 11. January-March.
Sharit K Bhowmick. (2008) “Urban Blessing, not Urban Blight.” Tehelka. Vol. 5, Issue 8, March 1.
William Ward. (1822) A View of the History, Literature, and Mythology of the Hindoos. Vol. 1. London, Kingsbury, Parbury, and Allen.

http://www.globalasia.org/Back_Issues/Volume_4_Number_1_Spring_2009/Globalization_and_Exclusion_The_Indian_Context.html

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